To The Moon

$C3.ai, Inc.(AI)$ Surged following its earnings report yesterday

C3.ai Inc. made significant gains in after-hours and pre-market trading following an optimistic earnings forecast and a shift in market sentiment. Despite reporting a net loss of $63.2 million for the fiscal third quarter, the company's revenue surpassed expectations at $66.7 million, and they recorded a customer count of 236. C3.ai anticipates a revenue range of $70 million to $72 million for the fourth quarter, with executives forecasting an adjusted loss from operations of $24 million to $28 million. Additionally, the CEO believes that the business sentiment is improving dramatically, which is a significant change from mid-2022, and C3.ai aims to become "cash positive and non-GAAP profitable" by the end of fiscal 2024.

Will the Price Surge Last?

C3.ai performance after earnings compared to SPX

However, Technology companies with smaller market capitalizations such as C3.ai tend to experience volatile surges following earnings reports, which do not typically last. Furthermore, the stock has already risen 90% this year due to the growing interest in artificial intelligence. When looking at the stock's past performance after earnings reports (see table above), the rally usually subsides as many day traders rush to short the bounce due to the high risk-reward ratio, even when the company's Earnings Per Share consistently beats consensus estimates. Therefore, buying put options could be a profitable strategy.

C3.ai day chart

Possible Put Options

While there are no apparent resistance levels in the day chart (See above), some volume exists for the PUT Options expiring next week at the price of 32 $AI%2020230310%2032.0%20PUT$ $AI 20230310 32.0 PUT$  and 27 $AI%2020230310%2027.0%20PUT$ $AI 20230310 27.0 PUT$  , which could potentially yield profits if C3.ai is unable to maintain its gains until next week. However, for these trades, it would be wise to take small profits where possible, as the indices have already shown signs of technical rebounding yesterday with SPX going up 0.76% and Nasdaq rallying 0.89%

Let’s also take a look at the financial performance of C3. ai in the past four quarters. Throughout these quarters, C3 AI continued to grow its customer count and maintain a strong cash position, with $789.8 million in cash, cash equivalents, and investments as of Q3 FY23. While the company has not yet achieved profitability, it has made progress towards this goal with strong revenue growth and increasing gross margins.

• Q4 FY22: C3 AI had a strong quarter, with revenue of $72.3 million, an increase of 38% compared to the same quarter one year ago. Subscription revenue was $56.3 million, a 31% increase year-over-year. GAAP gross profit was $55.0 million, representing a 76% gross margin. GAAP RPO increased by 62% to $477.4 million, while non-GAAP RPO increased by 50% to $516.8 million. GAAP net loss per share was $(0.55), while non-GAAP net loss per share was $(0.21).

•  Q1 FY23: C3 AI continued its growth trend, with revenue of $65.3 million, up 25% compared to the same quarter one year ago. Subscription revenue was $57.0 million, a 24% increase year-over-year. GAAP gross profit was $46.9 million, representing a 72% gross margin. GAAP RPO increased by 58% to $458.2 million, and non-GAAP RPO increased by 39% to $496.8 million. GAAP net loss per share was $(0.67), while non-GAAP net loss per share was $(0.12).

•  Q2 FY23: C3 AI saw a moderate increase in revenue, with total revenue of $62.4 million, a 7% increase year-over-year. Subscription revenue was $59.5 million, a 26% increase year-over-year. GAAP gross profit was $41.7 million, representing a 67% gross margin. GAAP RPO decreased to $417.3 million, while non-GAAP RPO decreased to $453.5 million. GAAP net loss per share was $(0.63), while non-GAAP net loss per share was $(0.11).

•  Q3 FY23: C3 AI had a strong quarter, with revenue of $66.7 million, exceeding guidance. Subscription revenue was $57.0 million, constituting 85.6% of revenue. GAAP gross profit was $44.4 million, representing a 67% gross margin, while non-GAAP gross profit was $51.0 million, representing a 76% non-GAAP gross margin. GAAP RPO was $403.2 million, while non-GAAP RPO was $436.3 million. GAAP net loss per share was $(0.57), while non-GAAP net loss per share was $(0.06).

Thank you for reading.

@TigerStars @CaptainTiger @MillionaireTiger