By Adam Clark
Artificial-intelligence stocks can't catch a break in recent days, and it is no different for C3.ai. Its shares plummeted Thursday after the software provider's earnings report, and Wall Street analysts are divided on the chances of a rebound.
C3.ai stock dived 15% to $19.53 in early trading Thursday, following its results reported Wednesday evening. The company -- which provides applications for large businesses and government agencies -- looks to be suffering from a rotation away from highly valued AI stocks.
It's a seemingly harsh reaction, considering C3.ai lost less money than expected for the July quarter and gave guidance broadly in line with estimates. However, with subscription revenue falling short of expectations, the market doesn't look ready to give credit to the company after it abandoned its previous profitability target last year.
Overall, the problem could be more to do with valuation than the latest quarter's performance. D.A. Davidson Gil Luria lowered his price target on the stock to $20 from $30 previously, while keeping a Neutral rating.
That's a hefty reduction, but Luria wrote in a research note that it was based on a revised valuation of roughly four times the company's expected revenue in 2025, roughly in line with C3.ai's peers.
C3.ai tends to split opinions. For instance, nearly 23% of its shares that are publicly available to trade have been 'sold short' -- or in other words, borrowed by investors betting on a decline in the stock.
Still, some bulls are sticking with it.
"While this was a slight bump in the road, we remain positive on C3.ai going into 2025 with a strong pipeline across industries coupled with solid top-line growth while seeing solid bottom-line expansion," wrote Wedbush analyst Daniel Ives in a research note.
Ives lowered his target price on the stock to $30 from $40 but kept an Outperform rating.
Write to Adam Clark at adam.clark@barrons.com
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(END) Dow Jones Newswires
September 05, 2024 10:21 ET (14:21 GMT)
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