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AI Stock Alert: The REAL Reason C3.ai Is Down Today


  • Shares of C3.ai (AI) are reacting negatively to its quarterly report as AI stock was down almost 25% at one point.
  • The stock rallied hard into the print, gaining more than 160% from the May 3 low to the May 30 high.
  • The firm beat on earnings and revenue estimates and reported solid guidance, but not enough to justify the rally.
AI Stock - AI Stock Alert: The REAL Reason C3.ai Is Down Today

Source: metamorworks / Shutterstock.com

As one would expect, shares of C3.ai (NYSE:AI) have been incredibly volatile today. While AI stock is down “just” 13.5% on Thursday, shares were down as much as 24.4%.

However, the volatility didn’t just start on Thursday. Shares fell 9% on Wednesday but rallied 67% in a four-day stretch leading into the two-day dip we’re seeing now. Amid all of this was the firm’s earnings report, which was released on Wednesday after the close.

From last month’s low on May 3 to last month’s high on May 30, AI stock surged 162%. That’s as the hype from Nvidia (NASDAQ:NVDA) and other firms helped drive an explosion of bullish momentum in AI stocks.

Even if AI isn’t a driving force in some of these businesses, investors and traders aren’t showing much restraint in gobbling them up.

The problem for AI stock wasn’t the quarter, as the firm delivered a top- and bottom-line beat. However, one has to wonder what spurred the stock price to more than double ahead of the event.

A loss of 13 cents a share topped expectations by 4 cents, while revenue of $72.4 million beat expectations by $1.07 million but grew just 0.1% year over year.

The Biggest Issue for AI Stock

Investors could draw a big enough issue classifying AI stock as a “growth stock” when it’s sporting year-over-year revenue growth of sub-1% in its most recent quarter.

However, the biggest issue for C3.ai stock on Thursday appears to be guidance.

Management expects fiscal first-quarter revenue in the range of $70 million to $72.5 million, about in-line with consensus expectations of $71.45 million. For the full year, management expects revenue in the range of $295 million to $320 million vs. expectations of $315.4 million.

There’s nothing really wrong with those guidance figures… had C3.ai shares not surged into the report. When Nvidia reported, the firm issued blowout guidance to a degree that almost nobody was expecting.

C3.ai couldn’t do that, and thus, AI stock has struggled since its report. Again, had the stock price not rallied so much ahead of the event, it would have likely reacted better.

That said, not everyone is necessarily negative on the firm.

Well-known tech analyst Dan Ives of Wedbush Securities upgraded the stock to outperform from neutral and raised his price target to $50 from $24. He added, “While it will be a bumpy road, we believe C3 has turned a corner and is ready to now capitalize on the $800 billion AI transformational opportunity over the next decade.”

Here’s the bottom line: Investors wanted a blowout quarter after seeing what Nvidia did. C3.ai delivered a solid report with a solid outlook. However, because the stock rallied so much ahead of the event, the reaction is lower.

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.

Article printed from InvestorPlace Media, https://investorplace.com/2023/06/ai-stock-alert-the-real-reason-c3-ai-is-down-today/.

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