C3.ai stock rises after exceeding sales targets and delaying earnings – Magic Post

C3.E New York Stock Exchange: Amnesty International The stock shrugged off the initial round of selling and was up nearly 3% at midday on heavy trading volume. This came a day after the company announced earnings for the second quarter of its fiscal year 2025. C3.ai stock fell about 10% in the pre-market as investors reacted to the company’s quarterly report.

C3.ai today

$38.16 -3.57 (-8.55%)

(As of 11/12/2024 ET)

52 week range

$18.85

▼

$45.08

Price target

$35.55

The report’s key numbers exceeded expectations. The company generated revenue of $94 million, exceeding expectations of $91 million. That was a 29% year-over-year increase in revenue growth and a 22% year-over-year increase in subscription revenue growth. This was the seventh consecutive quarter of increased revenue growth. The company also raised its revenue target for the next quarter and the full fiscal year.

On the earnings front, C3.ai reported a smaller-than-expected loss in earnings per share (EPS) of six cents. Analysts had expected a loss of 14 cents per share. However, the issue that troubles many investors is the company’s path to profitability. As we approach 2025, investors appear willing to accept an extension of valuations. Barring some black swan events, this is unlikely to change.

But it’s one thing to see technology stocks trading at a premium valuation when companies are generating increasingly profitable profits. That’s not the case with C3.ai, and with the path to profitability delayed by at least 12 months, it’s fair to question whether this is the right place to put your capital.

Many companies know that they need to have artificial intelligence. It’s becoming like what the Internet was in the late 1990s and early 2000s. However, many of these same companies lack the resources to build their own large language models (LLMs) needed to train an AI system.

This is where C3.ai comes into play. It gives companies ready-made, customizable AI applications for enterprise-level customers. This approach allows the company to serve a unique niche in the AI ​​market.

Demand is strong based on the 58 new agreements the company added this quarter. However, much of that growth may have already been built into the stock price, which has risen more than 78% since the company announced an expanded partnership with Microsoft Corporation Nasdaq: MSFT On September 30th. Under the terms of this partnership, C3.ai is the preferred application provider on the Microsoft Azure platform. The company will also create a shared go-to-market engine powered by Azure sales channels.

Currently, C3.ai generates a significant amount of its revenue from government contracts. This is not surprising. Wars of the future will increasingly be won by software and drones.

However, federal, defense and space contracts constitute approx 33% of the company’s business. That’s down from the 49% it was in the same quarter in 2023, but it still means C3.ai is highly reliant on cyclical business and will likely be subject to scrutiny from the incoming Trump administration.

Government contracts are more expensive to obtain and generally have a long sales cycle, which can negatively impact profitability. Therefore, the company must continue to diversify away from the government sector, but doing so may reduce margins.

If you are not currently a subscriber of C3.ai shares, please be aware that trading may be volatile. Post-earnings price action in AI stocks indicates a short squeeze. Short interest in the stock currently More than 17% buoyancy. This means the stock could be higher for a run in the short term. This also means that the stock price could reverse as suddenly as it rose.

Since the report, Analyst forecasts tracked by MarketBeat Showing largely bullish sentiment. JMP Securities was the most bullish, maintaining its outperform rating on the stock while raising its price target from $40 to $55. However, the current consensus price target remains at $33.10, representing a decline of more than 23%.

But it’s important to note that many of the company’s current agreements are pilot programs. It will take several quarters before investors know how many of these contracts will generate sustainable revenue and push the company closer to profitable earnings. Hence the sustained rise in stock prices will come.