C3.ai stock: Plaything of speculators

Last Updated: 6. März 2024By

Artificial intelligence is currently causing strong emotional reactions among investors. The stock market volatility in this segment is not for the faint-hearted. This is also the case for the C3.ai stock, whose ticker symbol AI suggests that it is a pure player in the field of artificial intelligence.

AI software for optimizing business processes C3.ai’s business model is based on providing enterprise AI software that helps companies optimize their business processes, improve customer satisfaction, and increase efficiency. C3.ai leverages the growing demand for AI technology and offers companies a comprehensive platform to harness the benefits of AI and optimize their business processes.

C3.ai – a future value par excellence C3.ai was founded in 2009 by billionaire and successful entrepreneur Tom Siebel and offers software in the field of artificial intelligence. The areas of application for AI algorithms are diverse, including combating money laundering, fraud detection, customer relationship management, and inventory optimization. C3.ai provides its software as a development environment in the cloud and as a standard package of pre-built apps. The list of customers is long and includes numerous renowned, globally operating large corporations. C3.ai’s main customers are usually large companies such as LyondellBasell, Raytheon, Shell, Baker Hughes, or the US Air Force.

Change in business model makes an impact However, with the hype surrounding AI and ChatGPT, there is a possibility that even smaller companies might show interest. In order to attract more customers, the company changed its pricing model from a subscription-based model to a consumption-based model in December 2022. The background: Lower entry costs are intended to attract additional customers. In return, C3.ai can earn more money if the software is used more extensively over time. However, the change will have a negative impact on revenue growth and profits in the next few quarters.

Revenue increases by 17% in the third quarter In the last quarter (note: C3.ai’s fiscal year ends on April 30), revenues were $78.4 million, 17% higher than in the same quarter of the previous year. Subscription revenues for the quarter amounted to $70.4 million, accounting for 90% of total revenues (vs. 86% in the same quarter of the previous year). As of January 31, 445 customers were using the company’s software. This means that 198 new customers (+80%) were gained in the last 12 months. The bottom line showed a net loss of $72.14 million.

Stock with a proud valuation For the current fiscal year, the company is targeting revenues of between $306 and $310 million. This represents revenue growth of 15% to 16%. Currently, the stock is trading at 13 times the expected revenues. However, C3.ai is likely to continue to make losses for a long time. According to analysts (source: Seeking Alpha), they are still expecting losses for the next three years. This means that the stock will remain highly volatile and is not suitable for the faint-hearted.