C3.ai: An Interesting Prospect

seekingalpha2021-02-08

Summary C3.ai is a unique company offering full-service AI solutions to Enterprise level customers. With a large addressable market and strong management, C3.ai is set to navigate an uncertain time. ...

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华美虎
·2021-02-18
an interesting company
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dofusbuthead
·2021-02-09
Interesting
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- jezzytezzy:
  very interesting
  2021-02-09
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Chororo
·2021-02-08
Any target price?
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2021koon
·2021-02-08
Bought earlier. Waiting for price to move higher
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2021koon
·2021-02-08
Bought it earlier. Waiting for price to move
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Notew
·2021-02-08
Very cool
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Hashreen
·2021-02-08
Interesting
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In 2020, C3.ai was one of the hottest tech IPOs originally IPOing for $42, quickly rising to $140 over the subsequent days. Since then, C3.ai has seen a rise in stock price.\nWith recent dips in C3.ai's price the question on many people's mind is is whether now is a good time to buy and where will the price go.\nData by YCharts\nIn this article, I break down C3.ai's unique position within the Artificial Intelligence sector and explain how it creates a compelling competitive advantage for C3.ai. C3.ai is a stock that should be attractive to many investors depending on their risk appetite.\nAI is still in Vogue\nA report from ARK Invest,says that deep learning could be the most important software breakthrough of our time. I mean, we’ve been saying that for years but let’s look at how it works and where C3.ai sits.\nTo me, there are 3 broad parts for an enterprise to successfully use AI:\n\nA business problem\nTechnology hardware\nSkills/models to achieve desired outcome.\n\nC3.ai is what I’d consider a ‘full service’ offering in that they solve the last two elements. More specifically C3.ai has three income streams:\n\nC3 AI Suite. Their core technology allowing customers to rapidly design, develop and deploy an Enterprise AI solution.\nC3 AI Applications. But on top of C3 AI Suite, C3 AI Applications includes turnkey AI solutions that can be used immediately.\nC3.ai Ex Machina. Their no-code solution that enables enterprises to more easily train AI models.\n\nWhat makes C3.ai unique when viewed against competitors is the ‘full service’ offering enabling easier access to AI for enterprise. However, C3.ai’s biggest competitors are those that they call technological partners, Google, AWS, and Microsoft are all cloud providers vying to increase their share in the full service AI market. For example AWS Sagemaker is a competing product to C3.ai Ex Machina.\nWhilst the 'full service' nature may appear quite novel for a company of C3.ai’s size, it comes as no surprise when considering major Customer Relationship Management companies such as Salesforce (CRM), Zendesk (ZEN) and other software are rapidly expanding their AI as a service type offering. The benefit of these companies over C3.ai is two-fold:\n\nAbility to specialize and dominate in a traditional vertical. Access to data is not typically an issue SaaS companies face.\nMore increased paths to a sale, for example a customer might sign up to Salesforce Service, then upgrade to Einstein Analytics.\n\nThe biggest downside to these competing companies is their ability to create bespoke solutions which is where C3.ai stands out. By creating bespoke high-value solutions,C3.ai boasts an impressive average contract value of $12.1 million for FY20.\nLead and Expand\nC3.ai adopts a 'lead and expand' style of sales wherein customers initially sign up for a lower contract value and then buy more services from C3.ai, so we can hope that C3.ai's account expansion is positive in the coming years.\nC3.ai's ACV has fallen from$16.m in FY19 to its current $12.1m in FY20. The company put this down to restructuring their sales organization and expanding their market partner ecosystem to expand their offering to smaller enterprises - which I believe is a good move but could potentially put them more in the way of existing solutions.\nC3.ai's IPO success has led to an eye-watering Price to Sales ratio (FWD) of 78.60, Palantir and JFrog have a Price to Sales of roughly 30. This does suggest that the market is heavily overvaluing C3.ai’s sales.\nC3.ai's go-to-market team comprises of 41 staff. With most technology companies, there is often atrade-off between Research and Development and Sales and Marketing Costs. Whilst C3.ai's sales ability has served them will to date, I believe they will be looking for further investment to help land sales deals. Of which, the average sales cycle is around six months.\nWhilst I don't see this as excessively long for the product and services C3.ai sells, it does put pressure on their existing 41 staff and limits the amount of opportunities they can handle at any one time.\nWhen looking at do it yourself type providers such as AWS, the time to first result is quite long for C3.ai. However, the solution is not as high-value, further investment in go-to-market should be aimed at decreasing their sales cycleto create a competitive advantage.\nProfitability and Growth\nC3.ai has experienced net losses for each period since their founding in 2009. In FY20, their net loss was $69.4m. This isn't particularly surprising for a technology growth company such as C3.ai, and we should expect these losses to continue for the foreseeable future.\nSource: C3.ai S-1 Report\nPleasingly C3.ai’s top-line revenue has increased 71% YoY, it’s unclear whether this is due to new customer growth or account expansion. Given C3.ai’s strategy of account expansion this is pleasing and goes somewhat to justifying the high Price to Sales ratio.\nGiven there is an estimated large addressable market of $271m in 2024 we should hope to see this grow. From an efficiency perspective, C3.ai also have a healthy Gross Margin of 75.1%.\nTheir ability to ever become profitable depends on increasing sales both through new customers and account expansion.\nTom Siebel: The Helmsman\nAt a management level, C3.ai has great leadership for a company of its age. At the helm as CEO we have Tom Siebel who is a seasoned Software Innovator who's managed rapidly growing software companies such as Oracle and Siebel Systems.\nUncertainty caused by COVID has put a squeeze on the company's budgets, this is more pronounced for R&D and exploration spending. The flow on effect to C3.ai is that company's need more certainty that results will follow. This intuitively has two effects for C3.ai:\n\nPotentially longer sales cycle as C3.ai sell the benefits of AI.\nSmaller contract values due to reduced appetite for AI.\n\nHaving said that, the Total Addressable Market for AI solutions is large and C3.ai has a first mover's advantage with full-service AI solutions. Siebel and his leadership team are incredibly experienced to help craft their niche and continue to grow their economic moat.\nConclusion\nC3.ai's value proposition is genuinely impressive and this is reflected with the high-value customers they have gained. With green-field opportunities and Tom Siebel at the helm, I'm very bullish on the company.\nHowever, there are factors against C3.ai with investment in Go-to-market teams needed and potentially slower sales ahead. Current price to sales ratio would imply that C3.ai is overvalued. For an ideal buy that minimizes risk, you may want to see a drop in current price. If increased risk is tolerable, C3.ai's current market position and growth prospects make it an attractive stock.","kind":null,"is_publish_news":true,"is_publish_highlight":false,"is_publish_live":false,"is_publish_wemedia":null,"editions":null,"column":"","sentiment":"0","news_tag":"","news_rank":0,"symbols":[],"gpt_button":1},"commentList":[{"id":384271492,"gmtCreate":1613659194116,"gmtModify":1704883345652,"author":{"id":"3481012429279872","authorId":"3481012429279872","name":"华美虎","avatar":"https://static.tigerbbs.com/069e1f4d34b1cef685e7c8573928fad2","vip":1,"crmLevel":1,"crmLevelSwitch":0,"idStr":"3481012429279872","authorIdStr":"3481012429279872"},"htmlText":"an interesting company","listText":"an interesting company","text":"an interesting company","images":[],"top":1,"highlighted":1,"essential":1,"paper":1,"likeSize":0,"commentSize":0,"repostSize":0,"link":"https://ttm.financial/post/384271492","repostId":1138482876,"repostType":2,"isVote":1,"likeStatus":false,"favoriteStatus":false,"reportStatus":false,"tweetType":1,"langContent":"EN"},{"id":383305146,"gmtCreate":1612835167985,"gmtModify":1704874779632,"author":{"id":"3567928573824405","authorId":"3567928573824405","name":"dofusbuthead","avatar":"https://static.tigerbbs.com/3f95bb18339690897607dbb347359363","vip":1,"crmLevel":5,"crmLevelSwitch":0,"idStr":"3567928573824405","authorIdStr":"3567928573824405"},"htmlText":"Interesting","listText":"Interesting","text":"Interesting","images":[],"top":1,"highlighted":1,"essential":1,"paper":1,"likeSize":2,"commentSize":1,"repostSize":0,"link":"https://ttm.financial/post/383305146","repostId":1138482876,"repostType":4,"isVote":1,"likeStatus":false,"favoriteStatus":false,"reportStatus":false,"tweetType":1,"comments":[{"id":3525312,"gmtCreate":1612866480959,"gmtModify":1680776233974,"authorId":3567197758280595,"author":{"id":3567197758280595,"idStr":"3567197758280595","authorId":3567197758280595,"name":"jezzytezzy","avatar":"https://static.tigerbbs.com/0ef706364982b2582c9190fdc988b8ee","vip":1,"crmLevel":5,"crmLevelSwitch":0,"individualDisplayBadges":[]},"repliedAuthorId":0,"objectId":383305146,"type":1,"supId":0,"prevId":0,"content":"very <u>interesting</u>","text":"very <u>interesting</u>","html":"very <u>interesting</u>"}],"langContent":"EN"},{"id":389629307,"gmtCreate":1612768768609,"gmtModify":1704873936409,"author":{"id":"3548890322785063","authorId":"3548890322785063","name":"Chororo","avatar":"https://static.tigerbbs.com/0cbcbb673621a63bd8bb2f8219eded23","vip":1,"crmLevel":2,"crmLevelSwitch":0,"idStr":"3548890322785063","authorIdStr":"3548890322785063"},"htmlText":"Any target price?&nbsp;","listText":"Any target price?&nbsp;","text":"Any target price?","images":[],"top":1,"highlighted":1,"essential":1,"paper":1,"likeSize":0,"commentSize":0,"repostSize":0,"link":"https://ttm.financial/post/389629307","repostId":1138482876,"repostType":4,"isVote":1,"likeStatus":false,"favoriteStatus":false,"reportStatus":false,"tweetType":1,"langContent":"EN"},{"id":389660368,"gmtCreate":1612766569654,"gmtModify":1704873921322,"author":{"id":"3575363327829260","authorId":"3575363327829260","name":"2021koon","avatar":"https://static.tigerbbs.com/ad08d3b98fb2d860daf2e2b2916dc11e","vip":1,"crmLevel":5,"crmLevelSwitch":0,"idStr":"3575363327829260","authorIdStr":"3575363327829260"},"htmlText":"Bought earlier. Waiting for price to move higher","listText":"Bought earlier. Waiting for price to move higher","text":"Bought earlier. Waiting for price to move higher","images":[],"top":1,"highlighted":1,"essential":1,"paper":1,"likeSize":0,"commentSize":0,"repostSize":0,"link":"https://ttm.financial/post/389660368","repostId":1138482876,"repostType":4,"isVote":1,"likeStatus":false,"favoriteStatus":false,"reportStatus":false,"tweetType":1,"langContent":"EN"},{"id":389687745,"gmtCreate":1612766492387,"gmtModify":1704873920673,"author":{"id":"3575363327829260","authorId":"3575363327829260","name":"2021koon","avatar":"https://static.tigerbbs.com/ad08d3b98fb2d860daf2e2b2916dc11e","vip":1,"crmLevel":5,"crmLevelSwitch":0,"idStr":"3575363327829260","authorIdStr":"3575363327829260"},"htmlText":"Bought it earlier. Waiting for price to move","listText":"Bought it earlier. Waiting for price to move","text":"Bought it earlier. Waiting for price to move","images":[],"top":1,"highlighted":1,"essential":1,"paper":1,"likeSize":0,"commentSize":0,"repostSize":0,"link":"https://ttm.financial/post/389687745","repostId":1138482876,"repostType":4,"isVote":1,"likeStatus":false,"favoriteStatus":false,"reportStatus":false,"tweetType":1,"langContent":"EN"},{"id":389687351,"gmtCreate":1612766365173,"gmtModify":1704873919704,"author":{"id":"3573860502809923","authorId":"3573860502809923","name":"Notew","avatar":"https://static.tigerbbs.com/8deb3ad16f5a0c557e882ccaf74814db","vip":1,"crmLevel":4,"crmLevelSwitch":1,"idStr":"3573860502809923","authorIdStr":"3573860502809923"},"htmlText":"Very cool","listText":"Very cool","text":"Very cool","images":[],"top":1,"highlighted":1,"essential":1,"paper":1,"likeSize":0,"commentSize":0,"repostSize":0,"link":"https://ttm.financial/post/389687351","repostId":1138482876,"repostType":4,"isVote":1,"likeStatus":false,"favoriteStatus":false,"reportStatus":false,"tweetType":1,"langContent":"EN"},{"id":389685083,"gmtCreate":1612765928342,"gmtModify":1704873917438,"author":{"id":"3570278985054387","authorId":"3570278985054387","name":"Hashreen","avatar":"https://static.tigerbbs.com/2fdcbd3e2f557176b591e8d1c7045dbb","vip":1,"crmLevel":3,"crmLevelSwitch":0,"idStr":"3570278985054387","authorIdStr":"3570278985054387"},"htmlText":"Interesting","listText":"Interesting","text":"Interesting","images":[],"top":1,"highlighted":1,"essential":1,"paper":1,"likeSize":0,"commentSize":0,"repostSize":0,"link":"https://ttm.financial/post/389685083","repostId":1138482876,"repostType":4,"isVote":1,"likeStatus":false,"favoriteStatus":false,"reportStatus":false,"tweetType":1,"langContent":"EN"}],"hasMoreComments":true,"newsSizeData":{"likeSize":13,"commentSize":7,"repostSize":0,"favoriteSize":6,"likeStatus":false,"favoriteStatus":false}}