4 Analysts Lower Price Target On C3.AI After Earnings: Here's Why

Artificial intelligence software company C3.ai Inc AI reported quarterly results and guidance on Thursday. Here’s the reaction from analysts.

The C3.AI Analysts: Morgan Stanley analyst Sanjit Singh issued an Underperform rating and price target of $31.

JMP analyst Patrick Walravens maintained a Market Outperform rating and lowered the price target from $96 to $59.

Needham analyst Mike Cikos issued a Buy rating and lowered the price target from $103 to $26.

Piper Sandler analyst Arvind Ramnani issued an Overweight rating and lowered the price target from $40 to $28.

Related Link: Is C3. AI The Lebron Of Artificial Intelligence: 4 Analysts Take On Recent IPO 

The Analyst Takeaways: Revenue growth of 42% from C3.AI was ahead of consensus for the third quarter.

“The outperformance was mostly on the professional services side of the house with the growth of 98% year-over-year to $13 million,” Singh said.

The company guided for fourth-quarter revenue to be in a range of $70.5 million to $71.5 million, which is shy of analysts’ estimates.

“Inline 4Q guidance suggests that it will take more time for the business to start delivering more consistent and predictable results,” Singh added.

The company reported possibly the best quarter in company history according to Walravens. Compression in the software sector is one of the reasons for a price target reduction.

“C3 has built an effective, scalable enterprise AI solution that solves problems with a large economic impact in a variety of industries,” Walravens said.

Cikos pointed to the third quarter simply being a beat and not a beat and raise quarter, with guidance coming in at consensus levels for the fourth quarter.

Industry diversification and the increase in customers were highlighted in the third quarter for Ramnani.

“Additionally, AI continues to expand its footprint with small/medium customers, executing 20 agreements,” Ramnani said.

CFO Change: Several of the analysts cited a personnel change as a reason for a more cautious approach. C3.AI announced Juho Parkkinen as the company’s new CFO. The change comes after recently appointed CFO Adeel Manzoor resigned. This marks the third CFO in the last 18 months for the company.

“We expect investors to have questions on the CFO announcement given the sudden resignation of Mr. Manzoor after just three months in the role, as well as updates to customer count,” Cikos said.

AI Price Action: Shares of C3.AI are down 6.15% to $21.98 Friday morning at publication.

Photo: Gerd Altmann from Pixabay