C3.ai stock drops 18% after disappointing results

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C3.ai stock drops 18% after disappointing results

The company posted disappointing results in its fiscal first quarter earnings report and dialed back expectations to post an adjusted profit by the end of fiscal 2024.

The Federal Reserve's forecast to keep interest rates higher for longer pushed the stock down toward the end of the month.

S&P Global Market Intelligence said the firm finished the month down 18%, down from a year earlier. As seen from the chart below, the stock fell sharply on the earnings report at the beginning of the month and continued to slide from there.

C3.ai shares fell 12% on Sept. 7 after the company topped headline consensus figures, but said it would no longer turn a profit in the current fiscal year as it continues to ramp up investment in what it sees as the large artificial intelligence opportunity in front of it.

Revenue rose to $72.4 million, beating the forecast at $71.6 million, and its overall accepted accounting principles net loss was nearly as high at $64.4 million. On a adjusted basis, the company posted a loss of $0.09 per share, an improvement over forecasts at $0.17 per share.

Bank of America's analyst response to the report was tepid, as Bank of America said that the company doesn't seem to be benefiting from AI tailwinds, and Deutsche Bank said the results were not enough to tamp down investor skepticism.

The market fell again in November after the Federal Reserve said interest rates would remain elevated for the next couple of years, which is a headache for growth stocks like C3.ai.

Over the last few days, stocks rebounded as tech stocks bounced back on no specific news.

The company expects only moderate revenue growth to be achieved for fiscal 2024, marking 15% growth at the midpoint. It also sees an adjusted operating loss of $70 million to $100 million.

A healthy dose of skepticism appears warranted, especially as revenue growth is modest and shares-based compensation is high.

Investors should avoid the AI stock until revenue growth significantly accelerates or it turns profitable.