C3.ai (NYSE:AI) appears to provide an extremely valuable service, while its founder is a preeminent IT developer and many institutions, including some huge ones, have invested in AI stock.
The valuation is relatively reasonable and the company has a very impressive founder and CEO in Thomas Siebel. Given these points, I’m very bullish on the shares’ longer-term outlook.
C3.ai has developed a system that enables data from many sources including databases, social media and sensors that allow companies to monitor equipment in the field.
The company’s patents have enabled the creation of an enterprise software platform that supports next-gen internet of things apps applications, according to patent documents.
In those documents, C3.ai also contends that companies that simplify Hadoop, a widely-used open-source infrastructure platform, have not adequately facilitated software development on the platform. By unveiling its new kind of technology stack C3.ai expects to fill that important void.
A Closer Look at AI Stock
Two data points suggest that the company’s significant opportunity. The size of its total addressable market was about $174 billion in 2020 is expected to reach $271 billion by 2024.
Moreover, unlike some makers of big-data analysis tools whose products are mostly geared to large enterprises, it sounds as if C3.ai’s products are very useful to both medium and large businesses
Siebel left Oracle back in the 1990s to form his own company, Siebel Systems, which helped lead the growth of the Customer Relationship Management (CRM) platform in that decade. Seibel Systems eventually was folded back into Oracle.
Baker Hughes is a large maker of oil and gas exploration equipment, and Blackrock is one of the world’s biggest investment firms.
These firms’ stakes in C3.ai, along with the fact that, as of Dec. 30, more than 53% of its share float was owned by institutions, gives me a great deal of confidence in the company and its stock.
The Bottom Line on AI Stock
In many ways, C3.ai’s tools seem similar to those of Snowflake (NYSE:SNOW). The latter company organizes cloud-based data and makes it easily accessible, while C3.ai organizes Hadoop-based data, partly derived from sensors and AI, and makes it easily accessible.
Both tech companies also have impressive CEOs with great track records.
But AI stock is changing hands for 40 times its trailing sales and has a market capitalization of $6.5 billion, while SNOW stock has a trailing P/S ratio of 55.6 and sports a market capitalization of $67 billion.
It’s true that C3.ai is not a name for conservative, value investors. Its valuation, although lower than that of Snowflake, is certainly elevated, and it has meaningful customer-concentration risks.
But given its strong business potential, its impressive $130 million gross profit over the last 12 months of its reported results, its impressive CEO and just-as-impressive investors, I recommend that long-term growth investors take a medium-size, bullish position in the name.
On the date of publication, Larry Ramer did not have (either directly or indirectly) any positions in the securities mentioned in this article.
Larry has conducted research and written articles on U.S. stocks for 13 years. He has been employed by The Fly and Israel’s largest business newspaper, Globes. Among his highly successful contrarian picks have been solar stocks, Roku, Plug Power and Snap. You can reach him on StockTwits at @larryramer. Larry began writing columns for InvestorPlace in 2015.