Investments continue to flow into AI (Artificial Intelligence)-related stocks, driving them higher. Thanks to investors’ optimism, C3.ai (NYSE:AI) stock has gained over 314% year-to-date. As shares of this enterprise AI application software company appreciated quite a lot, Morgan Stanley analyst Sanjit Singh found its valuation expensive, implying investors should show patience and not chase it. Further, analysts’ average price target indicates a downside potential from current levels.
C3.ai Stock: AI Interest Augurs Well for Growth
The interest in applying AI to business processes has spiked, and C3.ai, with over 40 enterprise AI applications, is poised to capitalize on the demand. The substantial market demand drives solid growth opportunities ahead and is leading to shorter sales cycles.
It’s worth highlighting that in Fiscal 2023, the company closed 126 agreements, compared to 83 in Fiscal 2022. Furthermore, the average sales cycle for agreements in Q4 was 3.7 months, down from 5 months in the prior-year quarter.
C3.ai launched its C3 Generative AI solution to the market in Q4 and rapidly closed three agreements with large enterprises.
Investors should note that its partner ecosystem is growing, which is important as it helps the company close more deals. C3.ai has expanded its product suite on marketplaces like Alphabet’s (NASDAQ:GOOGL)(NASDAQ:GOOG) cloud and Amazon’s (NASDAQ:AMZN) AWS.
Thanks to the ongoing momentum, C3.ai’s management remains confident and expects its business to deliver sustainable profit by the end of Fiscal 2024 (ending April 30, 2024).
Analysts Raise Red Flags
While Morgan Stanley analyst Sanjit Singh is not comfortable with AI stock’s valuation and finds it expensive, Bradley Sills of Bank of America Securities remains concerned about the company’s Fiscal 2024 revenue outlook.
C3.ai expects Fiscal 2024 revenue to be in the range of $295 million to $320 million, compared to $266.8 million in Fiscal 2023. The analyst worries that the company’s revenue guidance indicates that it is not benefitting from the AI cycle.
What is the Future of AI Stock?
AI stock has risen significantly so far this year. Thus, most analysts prefer to remain sidelined. It has received two Buy, five Hold, and three Sell recommendations for a Hold consensus rating on TipRanks. Analysts’ average price target of $26.16 implies 43.58% downside potential.
Investors should note that Patrick Walravens of JMP Securities is the most accurate analyst for AI stock, according to TipRanks. Copying Walravens’ trades on AI stock and holding each position for one year could result in 60% of your transactions generating a profit, with an average return of 25.97% per trade.
