To The Moon

$C3.ai, Inc.(AI)$ is scheduled to report the first quarter of their FY25 earnings cycle on Wednesday, 04 Sep after markets close.

Since the accounting issues reporting by short sellers, Kerrisdale Capital and Spruce Point Management in 2023, C3.ai does not seem to recover from this. Furthermore, the transition state that C3 found itself in after growth did not take off as expected given the AI tailwinds that management had been touting since ChatGPT’s launch.

Market expect C3.ai, Inc. (AI) to post quarterly loss of $0.13 per share in its upcoming report, which indicates a year-over-year decline of 44.4%. Revenues are expected to be $87.12 million, up 42% from the year-ago quarter.

I think what we need to focus on this quarterly earnings is whether C3.ai which has been increasingly looking to take a share of the U.S. Federal government’s IT budget, will continue to show progress like what we saw in its fiscal Q4 F Y24 earnings in May 2024.

C3.ai US Government IT Spending Bookings HIgh Despite Not Profitable

If we looked at the total bookings in the last quarter earnings, there is a significant increase of 7% in the Federal, Aerospace and Defense bookings, and we are also seeing state and local government bookings giving more than 10%.

So while these increase in bookings might be good news, but in order to generate good long-term returns, I think we need to be aware that C3.ai financial management to fulfill these bookings, though stable, there might be some cost controls need in order for us to see profitability for C3.ai.

If the defense and intelligence demand increase during periods of heightened global conflicts especially with the recent Israel one, we will need to see how C3.ai allocate their resource to fulfill these bookings.

So we might be seeing a significant increase in its operating expenses hence dragging down the earnings per share.

C3.ai (AI) Year-To-Date Returns

While C3's bookings growth metric shows potential but lacks clarity, risking sudden outlook downgrades if pilot trials do not convert to subscriptions.

While well-capitalized, C3's margin deterioration and high customer acquisition costs necessitate caution, despite some upside in sales forecast-based valuation models.

So we might be seeing higher loss in stock price to investors unless we can see effective cost control from C3.ai

C3.ai (AI) Price Target Forecast

Based on 2 Wall Street analysts offering 12 month price targets for C3ai in the last 3 months. The average price target is $35.00 with a high forecast of $40.00 and a low forecast of $30.00. The average price target represents a 49.96% change from the last price of $23.34.

As for the price target, I am not expecting the stock price to move much, unless we are seeing a very positive EPS, because C3.ai still faces challenges with customer acquisition costs and unclear revenue projections before Q1 FY25 earnings.

C3.ai (AI) Technical (MACD and KDJ)

From the technical, we can see that investors are also holding back though some selling happen last week, but KDJ is presenting a downward movement,

MACD is also converging with no sign or a bullish crossover, I will be monitoring on how investors would be trading by the price action on 03 and 04 Sep.

Summary

I would think while well-capitalized, C3's margin deterioration and high customer acquisition costs necessitate caution, despite some upside in sales forecast-based valuation models.

C3.ai lack of clarity despite good growth metric in bookings will have investors sitting at the fence, I think only a positive earnings per share and a outlook on their path to profitability would bring investors interest back.

Appreciate if you could share your thoughts in the comment section whether you think C3.ai would surprise with a better EPS and outlook in this upcoming earnings.

@TigerStars @Daily_Discussion @Tiger_Earnings @TigerWire appreciate if you could feature this article so that fellow tiger would benefit from my investing and trading thoughts.

Disclaimer: The analysis and result presented does not recommend or suggest any investing in the said stock. This is purely for Analysis.