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AI Stock Surges On Upbeat Sales Views; Is AI Stock A Buy Now?
C3.ai (AI) released preliminary sales numbers that beat its own outlook for the April-ended quarter Monday.
A sales forecast of $72.1 million-$72.4 million was above previous expectations of $70 million-$72 million. For the fiscal year that also ended April 30, the enterprise software company expects sales of $266.5 million-$266.8 million, above earlier views of $264 million-$266 million.
Analysts polled by FactSet expect 19% sales growth for the year ending April 2024.
Earlier in April, Wolfe Research analyst Joshua Tilton expected AI to grow just 11% in fiscal 2024, lower than consensus views of 20%.
In December, the enterprise AI software provider changed its pricing model from subscription to consumption-based. According to the latest company release, the conversion is being well received.
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) AWS, Google parent Alphabet's (GOOGL) Google Cloud and Microsoft's (MSFT) Azure, as well as smaller players.
Different Consumption Model
Consumption pricing works like an 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.
CEO Thomas Siebel indicated that C3.ai was using the economic downturn to complete the switch, with profitability expected to grow in 2024. With $800 million in cash, Seibel sees the company "well positioned to accelerate growth, gain market share and attain sustainable non-GAAP profitability."
AI shares rose 23% in strong volume Monday and cleared the 50-day moving average. The stock remains well off its prior high, however.
The software stock had a tumultuous April. Shares dived in early April after short seller Kerrisdale Capital raised questions about AI stock's unbilled receivables and margins from client Baker Hughes (BKR). But AI rose after the company responded to the allegation.
Massive Artificial Intelligence Growth
Siebel sees AI applications hitting $600 billion.
That is far less than Cathie Wood's prediction. The Ark Invest chief said in Ark Investment Management's "Big Ideas 2023" report that AI could add $200 trillion to the economy by 2030.
Generative AI will increase efficiency for professionals and AI stock has first-mover advantage, touting partnerships with Alphabet, Amazon, Microsoft, Accenture (ACN), Baker Hughes (BKR) and others.
AI Stock Earnings: Still In The Red
C3.ai reported sales of $66.7 million in the last quarter, down 4% year over year. However, it still beat guidance of $63 million-$65 million. The company posted a net loss per share of 6 cents, slightly better than the 7 cents per share loss last year.
The generative AI company disclosed $789.8 million in cash to carry it through "equity market turbulence." This should help "invest in growth through enterprise AI innovation and sales expansion."
Stock Surges On ChatGPT Success
The stock skyrocketed in February when users successfully tapped OpenAI's ChatGPT artificial intelligence app to generate answers, texts, emails and even books. AI stock stands to benefit from applications like ChatGPT.
C3.ai provides enterprise AI, which comprises applications for businesses but not consumers. But the company stands to benefit from consumer apps like ChatGPT because the code can be integrated into the C3.ai platform.
The ChatGPT app reached 100 million monthly active users in two months, beating popular apps like TikTok and Instagram. OpenAI's partnership with Microsoft ChatGPT uses natural language to help users write emails, develop codes and finds answers for daily questions.
The Redwood City, Calif.-based company makes AI-enabled software applications that can be configured for different purposes. The software can make networks more reliable, detecting fraud, balancing inventory and demand, solving supply chain issues and increasing energy efficiency. It can also help defend against money laundering.
AI Stock IPO
The enterprise software stock popped on the first day it started trading in December 2020, an IPO that priced shares at $42 each.
The stock rose from 11.19 at the end of 2022 to 30.92 earlier this month, including a 150%-plus surge in less than two months.
However, the Composite Rating of 55 falls below the desirable level of 90. The low 46 EPS Rating clearly weighs on the Composite Rating. The 61 Relative Strength Rating is also a point of concern.