C3.ai stock goes parabolic as growth continues: is it a bargain?

C3.ai (AI) is an American company that provides the C3 AI Application Platform, an end-to-end platform for developing, deploying, and operating enterprise artificial intelligence applications.

The company also runs the C3 AI Applications, a portfolio of industry-specific SaaS applications that help companies to automate their operations. Its enterprise offerings include C3 AI Applications, C3 AI Ex Machina, C3 AI CRM, C3 AI Data Vision, and C3 AI Application Platform. 

C3 offers its solutions to many companies that aim to incorporate artificial intelligence into their operations. Some of the most notable clients are firms like Infor, Baker Hughes, Raytheon Technologies, Johnson Controls, Shell, and Duke Energy.

C3.ai has been growing in the past few years as its revenue has jumped. It made over $156 million in annual revenue in 2019 to over $310 million in 2023. The challenge, however, is that the company has never been profitable. Its annual loss rose to $279 million in 2023, bringing the five-year loss to over $800 million.

C3.ai stock has risen to $44.17, the highest level since August 2023. It has risen by 132% from the lowest level this year. The HypeIndex rose to 86%.

Positive hype

• C3.ai positive hype rose after the company’s stock continued rising. It has risen by 132% from the lowest point this year, making it one of the best performers this year.

• The company has done well as demand for its artificial intelligence solutions continues rising. 

• C3.ai revenue rose by 29% to $94.3 million, higher than the $73.2 million it made a year earlier. 

• Its subscription revenue rose to $81.2 million, while its gross profit rose to $57.8 million. These numbers represented a 61% gross margin, a figure that is continuing to grow.

• C3.ai has a cash balance of over $730 million, a figure that has been growing in the past few quarters. 

• The company has continued to expand its business with the Department of Defense, one of the biggest spenders in the US. 

• It is benefiting from the ongoing artificial intelligence trend, which is doing well this year. Analysts expect that the AI industry will continue doing well in the near term.

• Analysts expect that C3.ai’s revenue will continue growing in the coming years. The annual revenue for 2024 will be $384 million, followed by $464 million in the next financial year.

Negative hype

• There are concerns about C3.ai trend of making losses. Its net loss came in at $65 million in the third quarter, a slight improvement from the $69 million it lost in the same period last year. Its nine-month loss was over $128 million.

• The company is highly overvalued on most metrics. Its rule-of-40 figure stands at minus 65. This is a closely watched metric that looks at a software company’s revenue growth and profit margins.

• C3.ai has a forward EV-to-sales ratio of 11.48, which is higher than most companies. The tech industry has a multiple of 3.27.

C3.ai stock summary

The daily chart shows that the AI share price has been in a strong bull run in the past few months. It has recently crossed the important resistance level at $38.33, the highest swing on February 29. This was a crucial level since it was the neckline of the triple-bottom pattern.

C3.ai stock has moved above the 50-day and 100-day Exponential Moving Averages (EMA), while the Average Directional Index (ADX) has risen to 38. Therefore, the stock will continue rising as bulls target the next key resistance at $55.

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