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C3.ai stock is UP 173% YTD so it begs the question “How high will it go next year?” That question and anticipated positive answer might seem justified but a review of the company’s business performance reveals that major challenges lurk just below the surface.
C3.ai Expects New Business Model Will Generate Major Increase In Revenue
C3.ai (AI) is transitioning from subscription-based revenue to a consumption-based model instead whereby, under the new model, businesses can come and go as they please, paying only for what they use. The company offers 40 turnkey, customizable applications for businesses across 10 industries allowing them to access AI reliably without having to build models from scratch. The shift in strategy has led to a temporary slowdown in C3.ai’s revenue but, as illustrated in the graph below, consumption revenue is expected to ramp up around the middle of next year (Q7).IMAGE SOURCE: C3.AI.
C3.ai Faces Major Challenges
According to Keithen Drury of the Motley Fool (see here), however:
C3.ai Valuation Metrics
C3.ai has yet to turn a profit and, as a result, the only valuation metric to report on is that based on its current and forward price-to-sales ratios as follows.
(Please note that the above metrics – see definitions at end of article – change daily with the change in SMCI’s stock price.)
Stock Price Forecast
Analysts expect C3.ai to increase revenue by 15.4% to $308 million in fiscal 2024 and by 20% to $369 million in fiscal 2025. Priced at 10x forward sales, AI stock trades at a premium, given its negative profit margins. The 12 analysts offering 12-month price forecasts for C3.ai Inc have a median target of $27.50, which only represents a 9% increase from today’s closing price. (Source)
In a time of unprecedented demand for AI, C3.ai should be reaping the rewards of the market from which it took its name but, given the above evidence, however, investors should look elsewhere to profit from this trend concludes The Motley Fool.
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