InvestorPlace contributor Dana Blankenhorn doesn’t mince words. With typical directness, Blankenhorn said that he pitied the fool who owned shares of enterprise artificial intelligence (AI) firm C3.ai (NYSE:AI) in 2021. Now, that’s a scathing indictment of AI stock if we’ve ever heard one — but is it justified?
Let’s look at the evidence. For one thing, it was discovered that CEO Thomas Siebel dumped around 600,000 shares, or roughly $30 million worth, of his company’s stock.
That’s certainly not an encouraging sign. It’s also worrisome that Bank of America (NYSE:BAC) analysts downgraded AI stock not long ago. Perhaps Blankenhorn’s harsh assessment was spot-on, then.
But let’s not take someone else’s word for it. By diving deeper into the data, we can form our own conclusions regarding C3.ai — and chances are, you’ll want to seek exposure to the machine-learning industry elsewhere.
AI Stock at a Glance
As of mid-January 2022, the good times for C3.ai’s loyal investors are far back in the past.
Those good times were pretty amazing, but they didn’t last long. In December 2020, C3.ai priced its initial public offering (IPO) at $42 per share. AI stock opened for trading at $100 on Dec. 9 and promptly rose to $109.
The bullish momentum persisted for a little while longer. On Dec. 23, AI stock reached to a 52-week high of $183.9.
Then, starting in late February 2021, the sellers completely took over. The stock slid to the $50 level by May, and finished the year near $31.
By the middle of January 2022, AI stock had sunk to $27, substantially below the IPO price. Trend followers and value hunters alike will find it difficult to analyze this stock, as every time it seems like the bottom has been reached, the selling pressure only intensifies.
Focus on Data, Not Executive Chatter
It’s interesting, how corporate executives can put a positive spin on practically any set of financial data. That’s part of their job description, some folks might contend.
Fair enough, but there are limits to self-promotion, even in the world of business. Thus, CEO Thomas M. Siebel’s characterization of C3.ai’s fiscal second quarter as “strong” deserves a closer look, and a measure of scrutiny.
During that quarter, which ended on Oct. 31, 2021, C3.ai expanded its enterprise AI footprint into a number of markets, while focusing to a large extent on the public sector.
It’s possible that the company sought to make changes because C3.ai had previously been unprofitable. In the three months that ended on Oct. 31, 2020, C3.ai incurred a net earnings loss totaling $1,944,000.
So, did C3.ai pivot to a profitable profile in the recently reported, supposedly “strong” quarter?
The Truth Is in the Numbers
As it turns out, the company’s fiscal hole had only deepened. During the most recently reported quarter, C3.ai managed to sustain a whopping $56,739,000 net earnings loss.
Will the situation improve if we extend the timeline? Let’s find out.
During the six months ending on Oct. 31, 2020, C3.ai’s net earnings loss totaled $14,794,000. In the equivalent time frame of 2021, the company’s net earnings loss was an astounding $94,198,000.
Digging deeper, we can observe that a recent U.S. Securities and Exchange Commission (SEC) filing exposes C3.ai’s considerable risk factors.
By the company’s own admission, C3.ai has a “history of operating losses and may not achieve or sustain profitability in the future.”
Not only that, but a “limited number of customers have accounted for a substantial portion” of C3.ai’s revenue. Thus, the company’s already problematic fiscal profile could worsen if a client’s contract expires and isn’t renewed.
The Takeaway for AI Stock
There are definitely lessons to be learned here. One is that not all machine-learning stocks are worth owning, even if it’s a high-conviction industry.
Another lesson is that already beaten-down stocks can continue to decline in value. Additionally, a CEO can call a set of financial results “strong,” but informed investors should always check the data.
What the data shows, then, is that Blankenhorn’s assessment of AI stock is tough but reasonable. I give AI stock an “F” grade in my Portfolio Grader.
It’s perfectly fine to envision a great future for artificial intelligence, but by all means, feel free to find a different company to risk your hard-earned capital on.
On the date of publication, neither Louis Navellier nor the InvestorPlace Research Staff member primarily responsible for this article held (either directly or indirectly) any positions in the securities mentioned in this article.
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