C3.Ai (AI) Sinks After Missing on Sales Estimates, Analyst Slashes PT by Over 40% But Remains Bullish
Shares of C3.Ai (NYSE: AI) have plunged 11% in pre-open Thursday after the company reported slowing subscription revenue.
The company’s revenue in the quarter that ended in April climbed 26% from the year-ago period to $52.3 million, marking a net loss of 24 cents a share, compared to analysts’ estimated revenue of $50.6 million and a 25-cent net loss per share. C3.ai’s remaining performance obligation surged 23% to $293.8 million.
"We achieved strong business and financial results in the fourth quarter and full fiscal year, as we advance our leadership position as the enterprise AI application software pure play," said C3.ai’s chief executive and founder Tom Siebel.
"The enterprise AI software market is rapidly growing, and we see accelerating interest in enterprise AI solutions across industries, geographies, and market segments,” he added.
The company said it expects revenue to range between $50 million and $52 million in the current quarter, compared to analysts’ expectations of $50.8 million.nAs for the full year, C3.ai expects revenue between $243 million and $247 million, up from the consensus of $240 million.
Morgan Stanley analyst Sanjit Singh took two takeaways from the Q4 earnings report: subscription revenue disappoints but bookings performance improves.
“Compared to 3Q21, which saw a solid beat versus consensus on subscription revenue offset by weaker bookings performance, 4Q21 saw the script flipped as a modest miss on subscription revenue (+17% vs cons of +22%) was accompanied by much stronger bookings performance in the quarter (GAAP RPO up 23% YoY and Non-GAAP RPO +40% YoY). We believe the subscription revenue performance reflects the weaker booking trends over the past year as a result of the pandemic's impact on the spending environment across a number of C3.ai's core verticals,” he said in a note.
Singh reiterated an “Underweight” rating on the stock as valuation remains “challenging” but hiked the price target to $62.00 per share from $60.00.
“We look to get more bullish on shares given a more material acceleration in growth and clearer signs of success in penetrating the mainstream enterprise market,” he concludes.
On the other hand, Wedbush analyst Daniel Ives took note of a “solid” quarter but slashed the price target on the Outperform-rated AI stock to $100.00 per share from $175.00 per share “to reflect more variability in the company's AI deal trajectory going forward and a lower multiple.”
Overall, the analyst remains bullish on AI.
“C3.ai delivered solid April results last night as the company beat the Street on headline results with billings and RPO a healthy indicator of future growth prospects. With the company going public late last year and having a choppy first quarter out of the gates along with lockup overhang, this was an important print to stabilize the ship and highlight the underlying growth story playing out under veteran software CEO Tom Siebel. We view C3.ai as one of the more disruptive enterprise software vendors in the last decade with the company laser focused on the convergence of AI, big data, and cloud computing.”