C3.ai shares slump as revenue forecast fails to live up to AI hype (updated)

Guardforce AI

01/06/2023 14:07

(Adds J.P.Morgan data on retail trading in 11th paragraph,
shorting data in last paragraph, adds comments throughout;
updates prices)
    By Medha Singh
       June 1 (Reuters) - Shares of C3.ai Inc  AI.N  dropped
nearly 20% in premarket trading on Thursday after the AI
software maker's quarterly revenue forecast missed estimates,
dampening some of Wall Street's recent euphoria around small cap
AI-linked stocks.
    Most other small-cap artificial intelligence (AI) related
stocks also fell, with analytics firm BigBear.ai  BBAI.N ,
conversation intelligence firm SoundHound AI  SOUN.O  and
Thailand's security firm Guardforce AI  GFAI.O  down between
1.8% and 8.4%.
    C3.ai, one of the top beneficiaries of the AI boom sparked
by the viral success of ChatGPT, has seen its market value more
than triple in 2023. 
    A jaw-dropping forecast last week by Nvidia, the world's
most valuable listed semiconductor company, fueled C3.ai's rally
further, sending its shares to a near one-and-a-half-year high
on Tuesday.
    The midpoint of C3.ai's full-year revenue forecast was
$307.50 million, below Wall Street expectations of $317.1
million, according to Refinitiv data.
    The Redwood City, California-based company is experiencing a
slow down in revenue as a result of its turnaround to a
consumption-based pricing model, from a subscription business.
    The company, however, said it had received bookings from
diverse industries, benefiting from the strong AI software
demand and remained on track to post a profit by the end of
April 2024.    
    "We are encouraged by the positive commentary and signs of
early traction on C3's large AI market opportunity," Morgan
Stanley analysts said in a note.
    However, they "continue to look for a signal that the
existing subscription base remains stable, new customer
acquisition converts into consumption revenue, and the path to
profitability does not get pushed out further."
    At least six out of 12 brokerages covering the stock raised
their price targets on the company, lifting the median Wall
Street target to $27, more than double from March 1, while
average rating was "hold," Refintiv data showed.
    "We would like to see some of (the) underlying growth
drivers to translate to higher levels of revenue growth to get
more constructive on the stock," Piper Sandler analyst Arvind
Ramnani said.
    C3.ai attracted the third-highest inflows from retail
clients in the past week, according to J.P.Morgan, indicating
its continued popularity.
    The stock's stellar year-to-date gains has also attracted
short sellers, with about 29.7% of its free float shorted,
according to Ortex data.   

 (Reporting by Medha Singh in Bengaluru; additional reporting by
Vansh Agarwal; Editing by Rashmi Aich)
 ((Medha.Singh@thomsonreuters.com; +91 80 6210 0592; Twitter: https://twitter.com/medhasinghs;))