Shares of C3.ai (AI, Financial) saw a decline of 1.94% today, closing at $26.29. This movement can be attributed to ongoing concerns regarding the company's financial performance and business outlook, as reflected in the recent quarterly earnings releases.
C3.ai, a player in the enterprise artificial intelligence sector, reported mixed financial results in recent earnings. The company has faced challenges with its profitability, as evidenced by continued GAAP net losses. In their Q3 results, C3.ai reported revenue of $98.8 million, a 26% increase year-over-year, yet incurred a GAAP net loss of $80.2 million. This negative financial trend persisted into Q4, where revenue grew to $108.7 million, yet the GAAP net loss remained substantial at $79.7 million.
One of the significant financial concerns for C3.ai is its share-based compensation, which totaled $174.4 million for the first three quarters of the fiscal year. This expense represents nearly 75% of the company's revenue for the same period, raising questions about sustainability and shareholder value.
From a valuation perspective, C3.ai is deemed "Modestly Undervalued" with a GF Value of $30.18. According to GuruFocus, there is a GF Value estimate of $35.35 in the next 12 months, suggesting potential upside for investors willing to weather the current challenges.
Despite its strong financial strength, as indicated by an Altman Z-score of 9.74, C3.ai struggles with profitability metrics. The company has experienced a long-term decline in gross margin, operating margin, and net margin, with current figures reported at 62%, -83.39%, and -74.21%, respectively.
The stock is characterized as "Speculative Growth," which aligns with its high-risk, high-reward potential. Investors should remain cautious due to the four severe warning signs identified, including poor quality of earnings and insider selling activity. It is crucial for potential investors to consider these factors alongside the moderate revenue growth observed.
