Anything and everything related to AI (Artificial Intelligence) is heading north these days thanks to the popularity of OpenAI’s ChatGPT and the wide application of generative AI. For instance, shares of C3.ai (NYSE:AI) have gained over 194% year-to-date. While AI fever has driven the shares of this enterprise AI application software company higher, analysts see downside potential from current levels and remain sidelined on the stock.
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The company announced preliminary financial results for Q4 earlier this month. Its preliminary results show that the company will exceed its prior guidance. C3.ai will report its Q4 financials on May 31 and expects revenue to be $72.1-$72.4 million in Q4. This indicates that its top line could remain roughly flat compared to the prior-year quarter, wherein it delivered total revenue of $72.3 million. Nonetheless, Q4 revenue guidance is above the Street’s expectations of $71.32 million.
The company expects to report an adjusted operating loss of $23.7 – $23.9 million in Q4. This compares favorably to its earlier guidance of a loss of $24-$28 million. Analysts expect C3.ai to report a loss of $0.17 a share compared to a loss of $0.21 in the prior-year period.
C3.ai stated that it closed 43 deals in Q4, reflecting an acceleration in applying predictive analytics to business processes. Moreover, C3 Generative AI witnessed increased interest from its existing customers and new prospects. It signed three new Generative AI application agreements in Q4.
Also, C3.ai remained optimistic and reaffirmed its prior guidance of achieving profitability (non-GAAP) by the end of Fiscal 2024 (ending April 30, 2024).
Following its preliminary results on May 15, Needham analyst Mike Cikos reiterated the Hold recommendation on the stock. Cikos said that the change in its pricing strategy (shift from the subscription model to a consumption model) would benefit the company in the long term. However, the analyst believes that the “transitions are very difficult to navigate from an execution standpoint.” Also, the analyst expects profitability to remain pressured in the short term due to the shift.
What’s the Prediction for AI Stock?
Overall, AI stock has a Hold consensus rating on TipRanks based on three Buy, four Hold, and four Sell recommendations. Analysts’ average price target of $20.57 implies 37.77% downside potential from current levels.
