The week got off to a good start for C3.ai (NYSE:AI) investors. Shares gained 23% in Monday’s session after the company released preliminary results for its fiscal fourth quarter (April quarter).
The enterprise software firm said revenue came in between $72.1 and $72.4 million, above the $71.1 million initially predicted by the company and Wall Street. Free cash flow for the period came in between $18 million and $19.4 million, some distance above the consensus mid-point estimate of ~$12 million.
Management had positive things to say about the quarter and noted that it is seeing more enterprise AI activity than at any time since the company was established. It highlighted the 43 deals closed during the quarter, 19 of which were the result of pilots initiated during the period.
C3.ai also noted that its partner ecosystem of cloud hyperscalers and industry leaders, such as Baker Hughes in oil and gas and Booz Allen in defense, were behind the strong performance. The full report is expected to get an airing on May 31.
Canaccord analyst Kingsley Crane says the results are an indication of “solid progress” being made. “We’ve been consistently bullish on the company’s long-term potential to capture enterprise demand for AI-powered solutions in what is likely the first or second inning of the adoption cycle,” Crane explained. “We’ve just been cautious on timing, particularly due to the fluid state of the financials as the company shifts toward consumption pricing and positive EBIT in FY24. There’s a reasonable case to give C3 credit for breakeven to slightly positive EBIT margins in FY24 given the progress we’ve seen so far.”
As a better indicator of growth, however, Crane is looking toward CY24, and the analyst sees a pathway for the company to grow revenue by over 25%, as trials start converting into full deals.
In the meantime, however, Crane sticks with a Hold (i.e., Neutral) rating and a $21 price target on AI stock, suggesting the shares will lose ~14% over the next year. (To watch Crane’s track record, click here)
Looking at the consensus breakdown, 3 Buys, 4 Holds, and 4 Sells have been issued in the last three months. So, AI gets a Hold consensus rating. At $20.50, the average price target indicates ~16% upside potential. (See AI stock forecast)
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Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.
