C3.ai (AI) broke out of a consolidation on Friday with results expected on Thursday. Is AI stock a buy now?
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The enterprise software maker released preliminary sales numbers on May 15 that beat its own outlook for the quarter ending April. AI shares rose in volume after the release and broke above the 50-day moving average. The title remains far from its historical record of 183.90.
A sales forecast of $72.1-72.4 million was above previous expectations of $70-72 million. For the fiscal year, which also ended April 30, the enterprise software company forecast sales of $266.5 million to $266.8 million, above the previous forecast of $264 million to $266 million.
Analysts polled by FactSet expect sales growth of 19% for the year ending April 2024.
Earlier in April, Wolfe Research analyst Joshua Tilton expected AI to grow just 11% in fiscal 2024, below the consensus of 20%.
In December, the enterprise AI software provider changed its pricing model from a subscription to a consumption-based model. According to the company’s latest statement, the conversion is well received.
This move allowed the company to align with industry standards for software-as-a-service providers. The practice is common across Amazon.co.uk‘s (AMZN) AWS, parent company of Google alphabetical (GOOGL) Google Cloud and Microsoft (MSFT) Azure, as well as smaller players.
Different consumption model
Consumption pricing works like a utility bill; that is, the higher the consumption, the more expensive the service. Since AI customers will benefit from access to an enterprise AI platform with unlimited usage and developer licenses, moving to consumer pricing could drive revenue growth, but not immediately.
CEO Thomas Siebel said C3.ai is using the economic downturn to complete the change, with profitability expected to increase in 2024. With $800 million in cash, Seibel sees the company “well positioned to accelerate growth, earn market share and achieve a sustainable unsustainable”. – Profitability under GAAP.”
The software stock had a tumultuous April. Shares plunged in early April after short seller Kerrisdale Capital raised questions about AI stock’s unbilled claims and client margins hugue baker (BKR). But AI increased after the company responded to the allegation.
Massive growth of artificial intelligence
Siebel sees AI applications reach $600 billion.
That’s far less than Cathie Wood’s prediction. The head of Ark Invest said in Ark Investment Management’s “Big Ideas 2023” report that AI could add $200 trillion to the economy by 2030.
Generative AI will increase the efficiency of professionals, and AI stock has first-mover advantage, touting partnerships with Alphabet, Amazon, Microsoft, Accenture (ACN), hugue baker (BKR) and others.
Profits of AI stocks: still in the red
C3.ai posted sales of $66.7 million last quarter, down 4% year-over-year. However, it still exceeded forecasts by $63-65 million. The company posted a net loss per share of 6 cents, slightly better than the loss of 7 cents per share last year.
The generative artificial intelligence company disclosed $789.8 million in cash to ride out “stock market turmoil”. This should help “invest in growth through enterprise AI innovation and sales expansion.”
Stocks Rise on ChatGPT Success
The stock soared in February when users managed to use OpenAI’s artificial intelligence application ChatGPT to generate replies, texts, emails and even books.
The ChatGPT app hit 100 million monthly active users in two months, beating 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.
The Redwood City, Calif.-based company makes AI-enabled software applications that can be configured for different purposes. The software can make networks more reliable, detect fraud, balance inventory and demand, solve supply chain issues and increase energy efficiency. It can also help defend against money laundering.
IPO of AI stock
The enterprise software stock emerged on the first day it started trading in December 2020, an IPO with a stock price of $42 each.
The composite rating of 86 is strong enough, although the low EPS rating of 46 should put investors on notice. The relative strength rating of 98 indicates the stock’s superior performance compared to other stocks in the IBD database.
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