As Artificial Intelligence Explodes, Can AI Stock Live Up to the Hype?
Machine learning software specialist C3.ai (NYSE:AI), has received a lot of press coverage this year, but is AI stock worth your attention now?
Some analysts are skeptical. Yet, the bullish argument might prevail in 2023 and beyond as C3.ai is a strong contender in the high-conviction artificial intelligence market.
Without warning, machine learning became a top-trending topic in early 2023. OpenAI’s ChatGPT chatbot became popular, and suddenly AI specialists like C3.ai moved into the spotlight.
Granted, some experts on Wall Street may wonder whether C3.ai can live up to the optimism surrounding machine learning. However, investors can be encouraged by some of the fiscal facts, and by the unabashed optimism of C3.ai’s chief executive.
Analysts Are Mixed on AI Stock
If you’re looking for a darling on Wall Street, C3.ai doesn’t fit that description. Currently, AI stock has an average analyst rating of “hold” and a consensus price target of $20.71, which implies some downside from the current share price.
As we’ll discover, there were some favorable data points in C3.ai’s third-quarter fiscal 2023 results. However, Needham analyst Mike Cikos was unimpressed. He attributed year-to-date gains in the C3.ai share price to “Generative AI fervor and C3 getting caught up as a meme stock.”
Meanwhile, Morgan Stanley analyst Sanjit Singh cautioned that optimism surrounding machine learning and C3.ai “is yet to be reflected in numbers as 3Q rev fell YoY and 4Q guidance assumes growth will be flat to down.” Deutsche Bank analyst Brad Zelnick claimed that a great deal of “work remains to bridge the gap from the results we saw in F3Q (revenue -4% y/y and OM -23%) to FY24 targets.”
C3.ai Can Grow Along With the AI Market
None of these cautionary notes have dampened C3.ai CEO Tom Siebel’s optimism. Indeed, he’s supremely confident about the machine learning market’s future prospects.
“AI will soon be a $600 billion addressable software market,” Siebel declared not long ago. As he sees it, “Everyone will be using enterprise AI applications, just like they use PCs, just like they use relational databases, just like we use [customer relationship management software].”
If you envision hyper-growth for the AI market like Siebel does, then an investment in C3.ai might be worth considering. Along with well-heeled private-sector clients, C3.ai serves giant public-sector clients like the U.S. Air Force and the Department of Defense.
Despite what some analysts might claim, C3.ai appears to be on the right fiscal path. The company’s revenue of $66.7 million for Q3 FY2023 exceeded C3.ai’s guidance of $63 million to $65 million.
Moreover, C3.ai’s non-GAAP quarterly net loss of 6 cents per share isn’t extremely far from breakeven. Siebel expects to bridge that gap fairly soon, as the chief executive predicts that his company will “become cash positive and non-GAAP profitable by the end of” fiscal 2024.
What You Can Do Now
Analysts did not heavily favor c3.ai. However, it’s up to you to decide whether or not you want to heed their warnings. C3.ai’s financial results certainly haven’t been perfect. However, the company might achieve profitability sooner than the critics expect it to.
Ultimately, if you’re super-bullish on the machine learning market like Siebel is, then an investment in C3.ai is worth considering. So, all things considered, AI stock gets a “B” rating. Your outlook on the stock should depend on your expectations for C3.ai’s financials and for the overall AI space.
On the date of publication, neither Louis Navellier nor the InvestorPlace Research Staff member primarily responsible for this article held (either directly or indirectly) any positions in the securities mentioned in this article.