PreMarket Prep: Why Sean Udall Is Eyeing C3.ai Stock

With the markets on shaky ground Friday, Sean Udall, the tech stock strategist and the publisher of The Udall Report, was a guest on the PreMarket Prep Plus show.

By having some cash on the sidelines, he discussed putting some to work in a few different issues.

One issue of interest was C3.ai.Inc. AI, which is the PreMarket Prep Stock of the Day.

The Company: C3 AI is a leading enterprise AI software provider for accelerating digital transformation. The proven C3 AI Suite provides comprehensive services to build enterprise-scale AI applications more efficiently and cost-effectively than alternative approaches.

Not A Good Year: C3AI made its debut on Wall Street Dec. 9, 2020, made its initial low on that day at $90.03 and ended that session at $92.49. Over the next 10 sessions it doubled, peaking on Dec. 23 at $183.90. Its all-time closing high was posted the day prior at $177.47.

After a volatile January ($112.05-$160.43), it made another run at that all-time high but came up shy, only reaching $176.94, and then crumbled. On Dec. 2, 2021, it found a bottom at $27.52. After putting another two lows in that area, it has rebounded as high as $36.33 and is currently trading at the $32 area.

The Fundamentals: According to Udall, the company is growing revenues at a 30%-35% rate. What has Udall excited about the company is that it was the recipient of a $500-million contract from the Department Of Defense. The contract will augment the current growth rate and has the potential to double it, he said.

In addition, Udall has experienced in the past when a company lands a government contract, it sometimes can lead to more contracts from other branches of the government.

Finally, the company believes its own stock is cheap, as it initiated a $100-million share buyback plan on Wednesday.

The full discussion with Udall from Friday’s PreMarket Prep Plus broadcast can be found here. The part where he covers C3AI starts at the 5:50 mark.

Short-Term Technicals: The rebound off the all-time low was capped on Dec. 10 at $36.33. On Wednesday (the same day as the buyback was announced), it had nearly a $4 rally but came up short of the recent high, only reaching $35.25.

It failed at the level on Thursday and was pounded, falling from $35.01 to $31.54. The reason for the decline was a price target reduction from Morgan Stanley, which maintained its Underweight rating and lowered its price target from $45 to $31.

Friday’s price action as of noon should be noted. After a flat open, the issue found support just under Tuesday’s low ($30.57), falling to $30.38, and has rebounded back to the $32 area.

Disclosure: At this time, Udall does not own any shares of the issue, but is looking to add it to his portfolio by year-end.