The second annual ranking of The Financial Times’ fastest-growing companies in the Americas put a fire under C3.ai (NYSE:AI), one of the world’s leading providers of enterprise artificial intelligence (AI). Thanks to the inclusion of C3 on the newspaper’s list, AI stock jumped on the April 14 news.
InvestorPlace’s Assistant News Writer Brenden Rearick provided three reasons why the publication is enthusiastic about AI stock. Since I’ve never covered the company before, I’ll take a look at those reasons.
I’m hoping it will give me the direction I need to make a call whether investors have the green light to buy, or if they should wait to get AI stock at a better price.
Either way, I’m always intrigued by AI-related businesses. And C3 is no exception.
The AI Industry Is White Hot
You’d have to be living under a rock to not comprehend the importance of AI. In case you haven’t noticed, humans have more information available to them today than they ever could hope to process, let alone analyze into actionable ideas.
That’s where C3 comes into play.
Founded by Thomas Siebel in January 2009, Siebel previously founded Siebel Systems in 1993. He sold that company to Oracle (NASDAQ:ORCL) for $5.8 billion in June 2006. He’s out to do it a second time but not before building C3 into one of the world’s leading providers of enterprise AI.
C3 went public in December at $42 a share. It gained 120.2% on its first day of trading. Since then, it’s given back more than half those gains. Despite the losses in 2021, there’s no question that the AI marketplace is growing like weeds.
“We serve a large and rapidly growing market, estimated to be $174 billion in 2020, growing to $271 billion in 2024,” Siebel stated in the company’s IPO prospectus.
“Our goal is to establish a global market-leading position in this market as we did at Oracle and at Siebel Systems. The difference being that this market is an order of magnitude larger than either of those opportunities.”
Another Customer to Prime the Pump
On April 12, C3 announced that Yokogawa Electric (OTCMKTS:YOKEY) had selected its C3AI Suite to help with its digital transformation.
“The C3 AI Suite brings new opportunities to seamlessly integrate state-of-the-art AI into our software portfolio at enterprise scale,” said Yu Dai, a Yokogawa director and Senior Vice President of the company’s Digital Solutions Headquarters. “Our initial work with C3 AI will drive digital transformation through more accurate simulations for our customers, leading to improvements in their operational efficiency and margins.”
The multi-year agreement is another opportunity for C3 to strut its stuff with a large enterprise customer. The free publicity alone will drive further sales. Investors can expect more announcements of this kind throughout 2021.
The Bottom Line on AI Stock
As InvestorPlace’s Larry Ramer stated recently, AI stock might be pricey, but the fact Tom Siebel is running the show makes it very attractive for long-term growth investors. I agree.
C3’s Q3 2021 report showed a 14% increase in sales through the first nine months of the fiscal year to $130.9 million.
As Tom Siebel pointed out in the company’s first conference call as a public company, its subscription revenue in the third quarter increased by 23% to $49.1 million, accounting for 87% of its overall sales, up from less than 86% in Q3 2020.
I’m concerned when I see a newly public company growing sales by 50-100% a quarter. That’s not sustainable. Siebel’s got C3 on a reasonable growth trajectory.
InvestorPlace contributor Matt McCall stated recently that the 67% drop from its 52-week high of $183.90 makes it an ideal growth buy for the long haul. That’s because C3’s business makes and saves companies millions, perhaps even billions, per year, by lowering their costs, upping sales, and boosting profits.
To make The Financial Times’ list, C3’s growth had to be primarily organic in nature, meaning it wouldn’t have made the list if it grew via acquisitions.
C3.ai’s growth rate is just right.
On the date of publication, Will Ashworth did not have (either directly or indirectly) any positions in the securities mentioned in this article.
Will Ashworth has written about investments full-time since 2008. Publications where he’s appeared include InvestorPlace, The Motley Fool Canada, Investopedia, Kiplinger, and several others in both the U.S. and Canada. He particularly enjoys creating model portfolios that stand the test of time. He lives in Halifax, Nova Scotia. At the time of this writing Will Ashworth did not hold a position in any of the aforementioned securities.
