Years ago, I watched an interview with Tom Siebel, founder and CEO of C3.ai (NYSE:AI). I was completely enamored with the business and the efficiencies C3.ai brought to its customers. I wanted to buy some right away, but the only problem? AI stock was not yet public.

Fast forward to December 2020 and the company is finally coming public. I thought, “Here’s my chance!”

But without access to the IPO, I slowly watched my opportunity to own a piece of this business slip away. Shares were thought to initially price in the $30 to $34 range. That climbed to $36 to $38, then finally set on $42 a piece.

Not a bad price necessarily, but then AI stock opened for trading at $100. A day later it closed at $130. Two weeks later it closed above $177. Many didn’t realize it was about to top for good just one day later on Dec. 23 at $183.90, but I was still pretty disappointed.

The company’s IPO came during a near-term peak in speculative sentiment, going public in the same week as Airbnb (NASDAQ:ABNB) and DoorDash (NYSE:DASH). Further, the stock had rallied almost 400% from its IPO in a few weeks. I thought a pullback was in order, but I obviously did not expect this.

Trading AI Stock

Following seven monthly declines in the last 10 months and as AI stock works on its fourth-straight monthly decline, we’ve finally seen a major correction in the share price. At this month’s low, shares of C3.ai were down 85% from their high.

However, I think it’s still fair to ask the question: Have we seen the low?

We have been trading around the low in the Ark Innovation Fund (NYSEARCA:ARKK) with some success. That includes the first bear-market bottom back in May 2021, but also the recent reversal.

The hope is that we’ve seen the low in ARKK, which is a good proxy for growth stocks. But what happens if the overall market rolls over? Will these serial under-performers — the stocks with the most relative weakness — begin to outperform? That’s a tough bet to make.

That said, we’re seeing some improvements on the chart.

First, I must mention that I’m a big proponent of accumulating businesses that have long-term opportunities. I argued that once a high-quality stock is down 40% or more, I like to begin accumulating it. Sometimes that accumulation period lasts days or weeks. Other times it’s months or quarters.

Of course, with an 85% decline, this situation is a bit different. First, AI stock had not established itself as a high-quality stock. Second, it debuted shortly before we had peak optimism in the growth space, setting it up for a huge decline.

AI stock is now clearing downtrend resistance (blue line), as well as the 10-day and 21-day moving average. From here, let’s see if it can clear the key $36.35 level, potentially putting the 50-day moving average in play.

On the downside, a move below $32 could put the $28 low in play.

Breaking Down C3.ai Stock

So what exactly does C3.ai do? From the company:

The proven C3 AI Suite provides comprehensive services to build enterprise-scale AI applications more efficiently and cost-effectively than alternative approaches. The C3 AI Suite supports the value chain in any industry with prebuilt, configurable, high-value AI applications for reliability, fraud detection, sensor network health, supply network optimization, energy management, anti-money laundering, and customer engagement.

At its high, AI stock commanded a market capitalization of roughly $17 billion. At the time, it left C3.ai trading at about 100 times current revenue estimates. Those revenue expectations have climbed notably though, from about $170 million at the beginning of the year to about $250 million now. All the while, the stock price has been in decline.

From here, analysts expect pretty solid growth, too. Consensus estimates call for 36% growth in 2021, 33% growth in 2022 and 28.5% growth in 2023. If it works out that way, C3.ai will generate revenue of $428 million in 2023.

The valuation is more appropriate now, too. Shares trade at 14 times this year’s revenue and 10.5 times next year’s expectations. That’s still rich, but nowhere near the valuation we saw nine months ago.

We have to keep in mind that C3 is not yet profitable or free cash flow positive yet, although it does generate impressive gross margins of about 75%.

Earlier this month, the company announced a five-year $500 million Department of Defense deal. Less than a week later, C3.ai announced a $100 million buyback — not typical for growth stocks, but clearly management smells value.

The Bottom Line

There’s clearly growth here and C3.ai is situated in a solid, secular growth part of the market. That said, growth stocks are in a bear market and this company doesn’t have the profitability or cash flow to support itself — yet.

In the meantime that leaves it vulnerable to the market swoons. And while its valuation is still high, it’s down considerably from the highs.

So what do investors do? I would say that if you really like C3.ai, you have two options. Wait for a confirmed bottom and begin to buy or start accumulating now while the stock is 80% to 85% off the highs.

Keep in mind that it can still fall from here, but investors that are worried about the losses can use a stop-loss just below the current low, near $27.50. The stock held that level on three straight sessions before popping back above $30 (see the chart for reference).

Otherwise, consider buying another distressed growth company if AI stock isn’t the right fit.

On the date of publication, Bret Kenwell did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Bret Kenwell is the manager and author of Future Blue Chips and is on Twitter @BretKenwell.