Is C3.ai The 'LeBron' Of Artificial Intelligence? 4 Analyst Takes On Recent IPO

One of the best-performing IPOs of 2020 was SaaS company C3.ai Inc AI. The stock priced at $42, above its initial range of $30 to $33, and closed at $161 in their first week of trading. 

Growth Ahead: C3.ai is called a disruptive enterprise software vendor by Wedbush analyst Daniel Ives.

It's "the LeBron of AI setting up for massive growth," said Ives, who initiated the company with an Outperform rating and $200 price target.

C3.ai has a subscription model that could drive 30% revenue growth annually and strong gross margins, said KeyBanc analyst Michael Turits.

The analyst has a Sector Weight rating on shares of C3.ai based on valuation.

"AI is the new internet for the enterprises," said Piper Sandler analyst Arvind Ramnani, who rates the stock Overweight with a $166 price target.

Ramnani said the company's revenue and gross margins are supported by strong gross retention and partnerships that will drive sales.

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Partnerships: The company's partnerships with Microsoft Corporation MSFT and Baker Hughes BKR are a positive for Ives. 

Turits mentioned a partnership with Baker Hughes and said it has a minimum value of $450 million for a five-year contract. Raytheon RTX and Adobe ADBE are were also mentioned.

"C3 has established lighthouse go-to-market and development partnerships with leaders in industries like energy (Baker Hughes), defense (Raytheon), financial services (FIS) and horizontal partnerships like CRM (Microsoft/Adobe)," the analyst said.

Analysts On C3.ai's Valuation: Wedbush Ives' price target comes from a valuation of 27x EV/revenue for fiscal year 2026.

Turits is cautious on C3.ai shares due to valuation. The analyst said three customers equal 44% of the company's revenue and has a relatively small number of customers.

"Despite its large, dynamic market opportunity, we view AI as fully valued at 82.2x EV/revenue (CY21E)," he said. 

C3.ai is valued at 35x 2023 estimated revenue of $325 million by Ramnani.

Morgan Stanley analyst Sanjit Singh initiated shares with an Underweight rating and $100 price target. The analyst said there is "compelling growth ahead," but success is priced in.

AI Price Action: Shares of C3.ai were trading down 13.65% at $120.11 at last check Monday.