From 200% to -40$: What went wrong with C3.ai? Is it a AI-meme stock?
Thanks to its unique ticker C3.ai (AI), and earnings that exceeded market expectations, $C3.ai, Inc.(AI)$ 's stock price soared 200% in just 3 months. But Kerrisdale Capital's recent short report of financial fraud sent C3.ai down 40% in two days.
From up over 200% in the Q1 to plunging 40%, what exactly did C3.ai go through in just one month?
1. AI heat and better-than-expected earnings boosted stock up 200%
In Q1, C3.ai shares rose more than 200%.
Due to the unprecedented AI progress in Chatgpt, AI concept becomes the hottest sector in stock market. C3.ai, thanks to its unique ticker AI, got the most attention from wallstreet except for the real chatgpt-related giants Microsoft and Nvidia.
On March 3, C3.ai reported earnings for its fiscal third quarter of 2023, beating analysts' expectations.
For the quarter, C3.ai revenue fell 4.4% year-over-year to approximately $66.7 million, but topped the company's second-quarter guidance and analyst estimates of $64.3 million.
Adjusted loss per share was $0.06, better than the $0.22 loss estimated by analysts.
2. Short report derived C3.ai’s value under $15
A short report from Kerrisdale Capital leads to $C3.ai, Inc.(AI)$ ‘s rapid decline.
Kerrisdale Capital issued a short report on the company last month and wrote to the company's auditor, Deloitte, in April to highlight its concerns about C3.ai's alleged financial fraud.
Sahm Adrangi stated:
The company used highly aggressive accounting techniques to inflate its income statement metrics to meet sell-side analysts' estimates of revenue and certain profit metrics, and to mask a significant deterioration trend in its underlying business.
Kerrisdale posted on its website that the company included costs associated with custom software production in R&D rather than cost of revenue to improve margins. The report said the “gross margins are overstated and at risk.”
Kerrisdale Capital's report concludes C3.ai's value under $15
To learn more about the short report, you can click https://www.kerrisdalecap.com/wp-content/uploads/2023/03/C3.ai-AI.pdf
3. Governments ban dampens investors’ interest in AI sector
C3.ai's situation has also been "exacerbated" by a series of AI bans by governments.
Last week's ban on ChatGPT in Italy kicked off a regulatory storm against OpenAI.
On April 3, a spokesperson for Germany's Federal Data Protection Commissioner said that ChatGPT may be temporarily banned in Germany for data protection reasons.
Media reports indicate that the Office of the Privacy Commissioner of Canada (OPC) announced on April 4 the start of an investigation into a complaint involving "allegations of the collection, use and disclosure of personal information by OpenAI without consent.
Conclusion
During this AI hype in stock market, $C3.ai, Inc.(AI)$ performs more like a meme stock, which can rose 200% in Q1 and fell 40% in two days. The giants Microsoft and Nvidia didn’t suffer much from this downtrend this time.
Whether $C3.ai, Inc.(AI)$ will continue to fall may depend on the financial fraud in the short report and AI sectors’ performance.
Do you think the short report is reasonable?
Will you buy $C3.ai, Inc.(AI)$ ? At whar price?
What’s your traing plan for AI heat?
Leave your comments to win tiger coins~
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AI is a mainstay in technology but give it more time.
I use an example, one of my of friend, he said he should use other online email other than gmail, reasons? Google "lost" in the AI battle, just like Yahoo lose in the search engine battle. My reactions are [What] [LOL] [Facepalm] [Speechless].
$Microsoft(MSFT)$ has plenty of such blunder, are most people still using MSFT?
always be sceptical with short reports as they have a vested interest.
I'm looking for a capitulation style trade on $C3.ai, Inc.(AI)$ i.e lots of volume at a key area for a potential dead cat bounce.
tired it last night for a scratch trade. but could be in play tonight for a scalp if enough things line up.