The demand for artificial intelligence (AI) has been on the rise, especially after the success of OpenAI’s ChatGPT. This led to a boost in the stock of C3.ai (NYSE:AI). However, the initial excitement for AI stocks has faded as C3.ai has experienced a significant drop in value over the past three months. Bank of America Securities analyst Bradley Sills believes that the company is not capitalizing on the increasing demand for AI, which raises concerns about its future prospects.
It is important to note that there is a growing interest in implementing AI in business processes. C3.ai, with its expanding enterprise AI applications, is expected to benefit from this surge in demand. However, this positive outlook is not reflected in C3.ai’s revenue projections.
During the Q1 FY24 conference call, C3.ai’s management mentioned that their enterprise AI applications are gaining traction. However, the company expects its revenue for Fiscal 2024 to be in the range of $295 to $320 million, reflecting a year-over-year growth of 11-20%. This growth rate seems low considering the strong demand for AI. Additionally, C3.ai’s margins are expected to be under pressure in the near term as the company invests more in generative AI.
Analyst Bradley Sills commented on C3.ai’s outlook, stating that the company maintained its revenue projections for Fiscal 2024 despite the solid demand for AI. This suggests that there are no significant AI tailwinds for the company. Sills maintains a Sell rating on AI stock. On the other hand, Wedbush analyst Daniel Ives reiterated a Buy recommendation but lowered the price target due to potential margin headwinds.
Given these factors, let’s take a look at the consensus rating from analysts for C3.ai stock.
Is C3.ai Expected to Grow?
C3.ai stock is still up over 144% year-to-date, despite the recent decline in price. However, analysts have a cautious stance on C3.ai stock, and the average 12-month price target suggests a slight downside potential from the current levels.
According to TipRanks, C3.ai stock has received two Buy, six Hold, and four Sell recommendations, resulting in a Hold consensus rating. The average price target of $26 implies a possible downside of 4.97%.
Bottom Line
C3.ai has a suite of generative AI products, invests in AI solutions, and has a growing pipeline of enterprise opportunities, which bodes well for long-term growth. However, the stock has already experienced significant gains, and its revenue growth outlook may not be attractive enough to support further upside potential.
Disclosure: The views and opinions expressed herein are those of the author and do not necessarily reflect those of Nasdaq, Inc.
