Based in California, enterprise artificial intelligence firm C3.ai (NYSE:AI) offers AI-focused software-as-a-service (SaaS) applications internationally. AI stock is inexpensive now, but that’s only because the share price has fallen sharply during the past year.
Machine learning is undoubtedly a great market to get exposure to. Moreover, C3.ai seems to be a thriving business, as the company has some high net-worth clients.
For example, Shell (NYSE:SHEL) used C3.ai’s technology to scale its predictive maintenance program to monitor and maintain more than 10,000 pieces of equipment. Also, LyondellBasell Industries (NYSE:LYB) recently signed a five-year expanded contract to accelerate the deployment of C3.ai’s machine-learning/AI applications.
As we’ll see, the company’s revenues have been on the rise. Plus, C3.ai’s CEO is emphatically bullish on the company’s stock – yet, there are financial experts who might not share his enthusiasm.
A Closer Look at AI Stock
Going back to where it all started, C3.ai priced its initial public offering at $42 per share in December 2020. AI stock opened for trading at $100 on Dec. 9 and went as high as $130 the following day.
The post-IPO rally continued for a couple of weeks. On Dec. 23, 2020, the AI share price topped out at a 52-week high of $183.90.
It was all downhill after that, unfortunately. AI stock finished 2021 at around $31, and in early March of 2022, it was trading near the $20 level.
Identifying meaningful support levels is difficult when a stock just keeps declining. Stay on the lookout for a sustained bounce, especially if it’s accompanied by heavy buying volume. That would be a sign of an imminent recovery, hopefully.
The results for C3.ai’s fiscal third quarter of 2022 could be described as a mix of good news and bad news.
Let’s start off with the good news. During fiscal Q3, C3.ai generated $69.8 million in total revenue, representing a year-over-year increase of 42%.
Furthermore, C3.ai raised its fiscal-year 2022 revenue guidance to $252 million, indicating a 38% increase compared to the prior year.
On the other hand, the company is still operating at a net earnings loss. Whether that loss is widening or not, depends on how it’s measured.
To be more specific, C3.ai’s fiscal Q3 GAAP net loss per share was 38 cents, versus 21 cents in the prior-year quarter. In contrast, the company’s non-GAAP net loss per share was 7 cents, compared to 13 cents in the year-earlier quarter.
Despite his company’s failure to achieve profitability, CEO Tom Siebel gushed with enthusiasm. “We killed it… We had an exceptionally strong quarter, exceeding everybody’s expectations,” the CEO reportedly said.
Siebel also had an emphatic message for prospective shareholders. “We’re a massively undervalued security… Investors may not understand the magnitude of the addressable market… But the stock is a screaming buy,” he said.
Not Everyone Is Convinced
Of course, those statements are just Siebel’s opinions, and he’s not exactly an impartial observer.
Besides, not everyone seems to agree with the CEO’s assessment of AI stock as a “massively undervalued … screaming buy.”
For instance, Deutsche Bank analyst Patrick Colville downgraded his rating on the stock from hold to sell. Along with that, Colville halved his price target on the stock from $36 to $18.
Also leaning bearish is Spruce Point, which apparently issued a short report on AI stock. Reportedly, Spruce Point provided a price target range for C3.ai shares of $12.85 to $15.40.
Then there’s Piper Sandler analyst Arvind Ramnani, who maintained an overweight rating on the stock, but at the same time slashed his price target from $40 to $28. So, one would be hard-pressed to claim that Ramnani is super-bullish on C3.ai.
The Bottom Line
Given C3.ai’s lack of profitability, it’s understandable if some financial experts aren’t enthusiastic about the company now. The shareholders can hope that C3.ai posts a net earnings gain in its upcoming quarters. Whether that actually happens, remains to be seen.
In the meantime, be wary of the C3.ai CEO’s enthusiasm. After all, his claim that AI stock is a “screaming buy” doesn’t necessarily reflect a disinterested, objective opinion.
On the date of publication, David Moadel 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.