C3.ai Stock Gets an Upgrade, but Is it Worth the Hype?

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C3.ai Stock Gets an Upgrade, but Is it Worth the Hype?

C3.ai stock upgraded to outperform on realistic guidance and discounted price

Oppenheimer values C3.ai stock at $40 per share, but doubts remain on revenue growth and company profitability

2023/11/21 (Nov 21st, 2023 6:08 pm)

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.

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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.

Expert Analysis

Navigating the Unsettled AI Territory: Unleashing Profit Potential Amidst C3.ai's Valuation Concerns

Sarah Johnson

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Analysis: Bearish Impact of AI on C3.ai Stock

The recent upgrade of C3.ai stock by Oppenheimer from a neutral rating to an outperform rating has generated hype around the company. However, the stock's valuation and lack of profitability present bearish factors that investors should consider before making any trading decisions.

While the upgraded rating may have initially boosted C3.ai's share price, investors should be cautious as the valuation gap and revenue growth expectations might not be fully justified. Oppenheimer values the stock at $3.7 billion, higher than its current market value of $3.3 billion. This suggests that the stock could be overvalued, adding a bearish sentiment to its future prospects.

Furthermore, C3.ai's lack of profitability and significant losses accumulated over the past year raise concerns. The company has not yet generated consistent and substantial revenue growth, with sales increasing by less than 11% in the previous quarter. Analysts surveyed by S&P Global Market Intelligence predict continued losses for C3.ai into 2026 and beyond, further increasing the bearish outlook.

Considering these factors, it is advisable for investors to approach C3.ai stock with caution. While the upgrade by Oppenheimer indicates some positive aspects of the company's future potential, the current valuation and lack of profits present a level of risk that could impact the stock price negatively.

Key Takeaways:

Oppenheimer upgraded C3.ai stock from neutral to outperform based on revenue expectations and the belief that the AI theme will endure.
C3.ai's stock price depreciation since June and more realistic guidance support the upgraded rating.
However, the stock's valuation exceeds its market value, suggesting a potential overvaluation.
The company's lack of profitability and substantial losses raise concerns about its long-term financial health.
Overall, investors should exercise caution and fully evaluate the risks associated with C3.ai stock in light of its valuation and profitability challenges.

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Why did C3.ai's stock price increase on Tuesday morning?

C3.ai's stock price increased on Tuesday morning due to Oppenheimer upgrading its rating to outperform.

What was Oppenheimer's initial rating for C3.ai stock?

Oppenheimer initially rated C3.ai stock as neutral.

What factors justify Oppenheimer's upgraded rating for C3.ai stock?

C3.ai's stock price depreciation of 20% since June and its more realistic and achievable guidance justify Oppenheimer's upgraded rating.

How is C3.ai's valuation assessed by Oppenheimer?

Oppenheimer assesses C3.ai's valuation based on revenue expectations, with the stock's appropriate price reflecting approximately 10 times the revenue projected for fiscal 2025.

What challenges are present when evaluating C3.ai stock's value?

The challenges when evaluating C3.ai stock's value include the projected robust revenue growth yet to materialize and the absence of profitability, with continued losses predicted for the company.