C3.ai dips even as J.P. Morgan upgrades on possibility of revenue boost
C3.ai (NYSE:AI) shares dipped in early Wednesday trading even as J.P. Morgan upgraded the stock, though the investment firm noted that there could be some volatility.
Analyst Mark Murphy raised his rating to neutral, but lowered the price target to $27, noting that the company has "solved for comprehensive, end-to-end, artificial intelligence at scale." The company typically signs three-year contracts, which can create revenue visibility, but its business is uneven by nature, due to "highly volatile bookings and billings patterns."
"While we lean incrementally more positive on the prospects for growth acceleration and recapturing a 30%+ glide path heading into [third-quarter] than in past quarters and are impressed with the deep partnerships C3 is developing, we fully acknowledge high sensitivity among investors amid a volatile market environment and the possibility that shares may react sharply to news either way," Murphy wrote.
The analyst added that there could be 50% downside risk and 50% upside potential to C3.ai (AI) shares and the firm is "lacking conviction in which direction will prevail."
C3.ai (AI) shares fell roughly 0.5% to $21.96 in early Wednesday trading.
In addition, Murphy noted C3.ai is in the enterprise artificial intelligence software market, which is expected to grow from $18 billion in 2020 to $44 billion by 2024, implying a 24% compound annual growth rate.
It has opportunities to grow by "signing on additional lighthouse customers which can also distribute the platform to their end customers," as well as traditional OEM relationships, growing its salesforce and cutting customer concentration.
C3.ai (AI) is slated to report third-quarter earnings after the close of trading on Wednesday, with the consensus calling for a loss of 26 cents per share and $67.16 million in revenue.