Artificial intelligence may well be the next big technological revolution after the internet. But investors looking to participate in this growth story have their work cut out trying to identify whether C3.ai (AI) is a potential leader. That begs the question, is C3.ai stock a buy now?
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C3.ai reported its first-quarter results after Wednesday’s market close. Sales grew 21% to $87.2 million, above analyst estimates for $86.9 million, and well ahead of the company’s own prediction for $82.5 million at the midpoint. C3.ai reported a loss of 5 cents per share, ahead of views for a 13-cent loss. Still, shares plunged more than 15% in after hours trading.
Shares of C3.ai soared after the company posted its fiscal fourth-quarter results in May and rebounded from the 50-day line. But the stock has given up those gains now.
Shares rose 0.5% on Sept. 3, but are in a downtrend and below the 50-day and 200 day moving averages.
Weakening Relative Strength For C3.ai Stock
C3.ai stock has a Relative Strength Rating of 13, a sharp drop from 97 a year ago. Investor’s Business Daily recommends focusing on stocks with an RS Rating of 80 or above. Its chart is also bearish as the 200-day moving average is above the 50-day line.
The stock has been underperforming the S&P 500 as well.
In January, the S&P 500 rose 1.6% while C3.ai fell 14%. In February, the stock catapulted 50% on fiscal third-quarter results and bullish guidance, while the S&P 500 gained 5%. But most of its gains evaporated in March as the stock fell 27% vs. the S&P 500’s gain of 3%.
It underperformed the index again in April, although fourth-quarter results helped the stock outperform the benchmark index in May as it gained 31% vs. the index’s 4.8% rise. In June and July, the stock fell 2% and 7.6% while the S&P 500 gained 3.5% and 1.1%. In August the index gained 2.3% with C3.ai stock falling 12.8%.
The stock is also prone to drastic swings. On Nov. 20, 2023, C3.ai stock jumped more than 5% but reversed lower to close with a 4.3% loss when Sam Altman was ousted as chief executive from another artificial intelligence specialist, OpenAI. Altman quickly returned to OpenAI, but the news apparently triggered speculative trading as the market continues to search for leaders in the space.
Shift In Pricing Model
However, industry trends have worked in its favor as well. C3.ai stock skyrocketed Feb. 1, when users successfully tapped OpenAI’s ChatGPT artificial intelligence app to generate answers, texts, emails and even write books.
The ChatGPT app reached 100 million monthly active users in two months, beating popular apps like TikTok and Instagram. OpenAI’s partnership with Microsoft‘s (MSFT) ChatGPT uses natural language to help users write emails, write code and find answers to daily questions.
There are other considerations. In December 2022, C3.ai changed its pricing model from subscription to consumption-based pricing.
The move brought the company in line with industry standards for software-as-a-service providers. The practice is common across Amazon.com‘s (AMZN) Amazon Web Services, Alphabet‘s (GOOGL) Google Cloud and Microsoft’s Azure, as well as smaller players.
Consumption pricing works like a utility bill. That is, the higher the consumption, the pricier the service. Since AI customers will benefit from having access to an AI enterprise platform with unlimited use and developer licenses, the switch to consumption pricing could drive revenue growth, but not immediately.
C3.ai CEO Thomas Siebel has indicated the consumption-pricing model will also lower barriers to entry because companies do not have to be tied to long contracts.
Artificial Intelligence News And AI Stocks To Watch
Is C3.ai Stock A Buy Now?
Redwood City, Calif.-based C3.ai makes software applications equipped with artificial intelligence that can be configured for different purposes.
The software can make networks more reliable by detecting fraud, balancing inventory and demand, solving supply-chain issues and increasing energy efficiency. It can also help defend against money laundering.
The enterprise software stock popped on its first day of trading on Dec. 9, 2020. Shares leapt from an IPO price of 42 to finish at 92.49 that day.
C3.ai stock has some work to do to improve its Composite Rating, which stands at 26 out of 99. The EPS Rating lags even more, at 14. Shares are also below the 50-day moving average with no base in sight yet. The stock is not a buy now.
To find the best stocks, check out IBD Stock Lists and IBD Data Tables.
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