Oppenheimer’s Initial Coverage and Upgrade to Outperform
According to StreetInsider.com, C3.ai stock, a prominent artificial intelligence (AI) company, experienced a 3.5% increase in share price on Tuesday morning (as of 11:40 a.m.). Oppenheimer, one of the leading financial analysts, first started covering C3.ai stock in June with a neutral rating. However, the firm has now upgraded its rating to outperform based on significant factors.
C3.ai’s Deeper Guidance and Analyst Forecasts
C3.ai’s stock price depreciation of 20% since June, along with its more realistic and achievable guidance, justifies Oppenheimer’s upgraded rating. Analysts, including Oppenheimer, have closely observed this guidance. Previously, it was predicted that C3.ai would incur a loss of $0.12 per share in its next earnings report. However, the current consensus among analysts now estimates a loss of $0.18 per share.
Interestingly, Oppenheimer does not assess C3.ai solely based on earnings, which the company does not currently possess. Instead, the valuation is pegged on revenue expectations. According to Oppenheimer, the stock’s appropriate price should reflect approximately 10 times the revenue projected for fiscal 2025. This is in light of the belief that the AI theme will endure, potentially leading to revenue growth of up to 23% by mid-2024.
Opposing Factors: Valuation and Profits
The current valuation of C3.ai stock stands at $3.3 billion (just under $29 per share), whereas Oppenheimer assesses its worth closer to $3.7 billion or $40 per share. However, it is worth noting that the projected robust revenue growth is yet to materialize, with sales growth of less than 11% experienced in the previous quarter.
Moreover, the absence of profitability presents a challenge when evaluating the stock’s value. Over the past year, C3.ai has accumulated losses exceeding $260 million. Analysts polled by S&P Global Market Intelligence predict continued losses for the company, extending into 2026 and potentially beyond.
Considering the persisting and anticipated future losses, it is advisable to approach C3.ai stock with caution and potentially view it as a sell.