C3.ai (AI) broke out of a consolidation on Friday, earnings are expected on June 1st. Is AI stock a buy now?
The enterprise software maker released preliminary sales figures on May 15 that beat its own forecast for the quarter ended April. KI shares surged following the release, surpassing the 50-day moving average. The stock remains well off its all-time high of 183.90.
A revenue guidance of $72.1 million to $72.4 million was above previous expectations of $70 million to $72 million. For the fiscal year, which also ended April 30, the enterprise software company expects revenue of $266.5 million to $266.8 million, ahead of previous estimates of $264 million to $266 million.
Analysts polled by FactSet expect revenue to grow 19% for the year ended April 2024.
Earlier in April, Wolfe Research analyst Joshua Tilton expected AI to grow just 11% in fiscal 2024, down from the consensus expectation of 20%.
In December, the provider of enterprise AI software changed its pricing model from subscription to consumption-based. According to the latest company announcement, the conversion is going down well.
With this move, the company is compliant with industry standards for software-as-a-service providers. The practice is common everywhere Amazon.com‘s (AMZN) AWS, Google parent company alphabets (GOOGL) Google Cloud and Microsoft's (MSFT) Azure and smaller players.
Different consumption model
Consumption pricing works like a utility bill; This means that the higher the consumption, the more expensive the performance. As AI customers benefit from access to an enterprise AI platform with unlimited use and developer licenses, the move to consumable pricing could spur revenue growth, but not immediately.
CEO Thomas Siebel pointed out that C3.ai took advantage of the economic downturn to complete the transition, with profitability expected to increase in 2024. With $800 million in cash on hand, Seibel believes the company is “well positioned to accelerate growth, capture market share and make sustainable investments.” -GAAP profitability.”
Software stock had a turbulent April. Shares plummeted in early April after short seller Kerrisdale Capital raised questions about AI stock's unbilled receivables and margins to customers Baker Hughes (BKR). But AI rose after the company responded to the allegation.
Massive growth of artificial intelligence
Siebel projects AI applications will reach $600 billion.
That's far less than Cathie Wood's prediction. Ark Invest chief said in Ark Investment Management's Big Ideas 2023 report that AI could contribute $200 trillion to the economy by 2030.
Generative AI will increase the efficiency of professionals and AI stocks have a first-mover advantage by forming partnerships with Alphabet, Amazon, Microsoft, Accenture (ACN), Baker Hughes (BKR) and others.
AI Stock Gains: Still in the red
C3.ai reported revenue of $66.7 million in its most recent quarter, down 4% year over year. However, the forecast of 63 to 65 million US dollars was still exceeded. The company posted a net loss per share of 6 cents, slightly better than the 7 cents per share loss last year.
The generative AI company announced $789.8 million in cash to weather the “stock market turmoil.” This is intended to help “invest in growth through enterprise AI innovation and sales expansion.”
Stocks soar on ChatGPT success
The stock soared in February when users successfully leveraged OpenAI's ChatGPT artificial intelligence app to generate replies, texts, emails, and even books.
The ChatGPT app reached 100 million monthly active users in two months, surpassing popular apps like TikTok and Instagram. OpenAI's partnership with Microsoft ChatGPT uses natural language to help users write emails, develop code, and find answers to everyday questions.
Based in Redwood City, California, the company makes AI-powered software applications that can be configured for various purposes. The software can make networks more reliable, detect fraud, balance inventory and demand, solve supply chain problems and increase energy efficiency. It can also help prevent money laundering.
IPO of AI stock
Enterprise software stock soared on the first day of trading in December 2020, in an IPO that saw shares cost $42 each.
The composite rating of 86 is sufficiently strong, although the low EPS rating of 46 should caution investors. The 98 Relative Strength Rating indicates the stock's superior performance compared to other stocks in the IBD database.
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