C3.ai (NYSE:AI) stock is trending on social media and falling sharply today after the company announced that it would not attain its previous guidance of profitability in its fiscal fourth quarter. In the wake of the news, a number of firms have been bearish on AI stock.
C3.ai provides software and apps that enable its customers to easily utilize artificial intelligence (AI). Among its largest customers are the U.S. Department of Defense, Shell (NYSE:SHEL), Koch Industries and Georgia-Pacific.
AI Stock and the Guidance Revision
C3.ai reported that it would not generate positive net income, excluding some items, in its fiscal Q4. Proclaiming that the “market opportunity is immediate, and we intend to seize it,” the company said it would not meet the profitability milestone because it had decided to increase its investments in multiple initiatives. Among the areas in which C3.ai intends to spend more are lead generation, branding and market awareness.
C3.ai CEO Thomas Siebel elaborated:
“The market response to our Generative AI offerings is staggering […] We believe that advent of Generative AI may more than double the addressable market immediately available to C3 AI, and now with our new C3 Generative AI Suite of products out the door, you can expect that we will be investing in the coming quarters to promote, market, and support these initiatives.”
On a positive note, however, the company still plans to generate positive cash flow in fiscal Q4 and fiscal 2025.
As a result of the news, Wedbush cut its price target on AI stock to $42 from $50. Meanwhile, JPMorgan wrote that it does not expect C3.ai’s revenue to increase sufficiently going forward to justify the increased investments.
Valuation and the Price Action of C3.ai Stock
AI stock has a very high trailing price-to-sales (P/S) ratio of 12.9 times.
Shares of C3.ai have dropped more than 25% in the last three months. They have also soared over 140% so far in 2023.
On the date of publication, Larry Ramer did not hold (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.
