To The Moon

$C3.ai, Inc.(AI)$ is a company that provides enterprise artificial intelligence (AI) software for various industries and applications.

It has a stable of > 40 turnkey Enterprise AI applications that meet the business-critical needs of global enterprises in manufacturing, financial services, government, utilities, oil and gas, chemicals, agribusiness, defense and intelligence, and more.

The company's stock has been volatile recently (refer to below diagram), as it faced :

• Short-seller attack. Case in point - 5 days ago, it was “attacked” by Kerrisdale Capital is a well-known hedge fund that often operates as an activist short seller.

• Disappointing Quarterly earnings report -

• A competitive landscape.

C3.ai Past 6 months stock price

Some investors may wonder if C3.ai is a meme stock ?

Whether it has real value & growth potential.

Definition of Meme Stock :

 A meme stock is a stock that gains popularity and momentum on social media platforms, such as Reddit's WallStreetBets, regardless of its underlying fundamentals.

Meme stocks are often driven by (i) hype, (ii) speculation and (iii) emotional trading rather than by rational analysis and valuation.

Meme stocks can experience huge swings in price, both up and down, depending on the sentiment and actions of the online community. Examples would be $AMC Entertainment(AMC)$ , $GameStop(GME)$ , $Bed Bath & Beyond(BBBY)$

 What I Think :

C3.ai to me, does not seem to fit the definition of a meme stock.

This is because :

1. It does not have a large or loyal following on social media.

2. It does not have a high level of short interest or trading volume.

3. It cannot really be considered a new or unproven company as it has been around since 2009.  Its founder was Tom Siebel of CRM solution – Siebel Systems that was eventually subsumed by Oracle in early 2000s.

4. It has established partnerships with major players like Microsoft (since 2018) and Baker Hughes (since Feb 2020).

5. It claims to have a unique and differentiated platform that enables customers to build, deploy, and operate AI applications at scale.

Just to clarify. Even though I do not think that C3.ai is a meme stock, it also does not mean that it is a good investment.

The company faces many challenges & risks ahead:

• Slowing revenue growth,

• Widening losses,

• High valuation,

• Increasing competition, and customer concentration.

Q2 2023 Quarterly Earnings : (latest)

• Revenue came in at $66.67 Million vs $69.77 Million (Q3 2022) vs $64 Million (Wall street’s expectations). YoY it fell by -4.44%

• Subscription Revenue came in at $57.04 Million vs $57.08 Million (Q3 2022). YoY it fell by a negligible -0.07%. It also means its subscription services did not grow for the past 1 year.

• Gross Profit was $44.4 Million vs $52.4 Million (Q3 2022). YoY it fell by -15.27%.

• Net Loss was -$63.16 Million vs -$39.45 Million (Q3 2022). YoY it fell by -60.1%.

• Loss per share (GAAP) was -$0.57 cents vs -$0.38 cents (Q3 2022). YoY it fell by -50%.

I feel that its Q3 2023 quarterly earnings was a mixed bag of results, especially when compared against Wall street’s expectations.

Q4 2023 Outlook And Beyond ?

1. Lots of challenges ahead as it competes headlong against larger & more established companies eg. IBM, Salesforce & Amazon, where these mega cap companies have way more resources & capabilities in the AI market.

2. C3.ai heavily reliance on a few large customers for its revenue (eg.  US Air Force & Shell petroleum), directly exposes it to contract renewals & negotiations risks.

3. Guidance provided for Q4 2023 and FY 2023 was below analysts' expectations.

4. It expects Q4 2023 revenue to be between $67 Million and $69 Million vs Wall street’s analysts expected $71.6 Million. The company expects FY 2023 revenue to be between $259 million and $261 million, while analysts expect $263.6 million.

Last but certainly not least, I still arrive at the same conclusion.

That is C3.ai is neither a meme stock nor a solid growth stock (yet). Its past 2.5 year’s performance should be sufficient proof (refer to below diagram).

C3.ai Past 2.5 years performances

C3.ai looks like a speculative stock (to me!) with some potentials & uncertainties.

Objectively, C3.ai was a “victim” of circumstances :

• It IPO at the “right” place and the “right” time.

• On 09 Sep 2020, it went public; listed on the Nasdaq at US$42 per share. 

• Timely IPO because market was awashed with excessive liquidity.

• Due to the Fed’s quantitative easing (QE) exercised to keep the market buoyant and afloat.

• On first-day trading, its gain was as high as +143% with a market cap nearing $10 Billion intraday

• No analysts nor media seemed to want to acknowledge this matter of fact.

• Is it a wonder that C3.ai stock price “crashed” as the insidious effects of continuous US’s interest rate hike continues to take its toll on the stock market?

• Also remembering that the Fed’s QE exercise has given way to quantitative tightening (QT).

Currently, I have no plans to buy any AI stock, not even 1 or 2 share/s for monitoring purposes.

When it comes to investing, patience is key; a value that I have touched on in my first post on Easter Egg hunt game. Click here to read about it !

Investors interested in C3.ai need to do their homework and come mentally prepared for high volatility and risk as the aftermath of the “short report” by Kerrisdale Capital invesment firm is still being felt.

• Do you think that C3.ai is a meme stock after reading this post by yours truly (moi !).

• Do you think you will be interested in getting AI stock to add to your portfolio ?

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