Artificial Intelligence (AI) application company C3.ai (NYSE:IA) sold down 11.2% through 10:50 a.m. ET this morning after KeyBanc analyst Eric Heath lowered the stock’s rating from sector weight to underweight, i.e. preservation for sale.
According to Heath, C3 shares that closed near $40 last night are actually worth closer to $29.
Valuation is now the key to KeyBanc’s downgrade. As Heath points out, even adjusted for cash on hand, C3 stock costs a staggering 13.3 times annual sales, nearly twice the average valuation of its AI peers (7.3 times the sales).
Notably, Heath does not provide a price/earnings valuation for C3 stock, valuing the stock solely based on its sales. And the reason is that C3 has no income on which to value it. Worse, C3 not expected to become profitable anytime soonaccording to most analysts who follow the stock.
Valuation is not its only concern either. Heath also warns that consensus forecasts for C3 sales in fiscal years 2026 and 2027 “may be too high given that growth in subscription revenue excluding initial licensing has been moderate at -1% (y-o-y). the other) during (the second fiscal quarter). »
Translation: C3’s subscription revenue is falling, not growing, which seems suboptimal for a supposedly growing title. Combined with continued losses and fears that a recent contract expansion with Microsoft It may not be all it’s cracked up to be (concerns I share, by the way), KeyBanc just doesn’t think C3 stock is worth what investors are paying for it.
Between the company’s long history of losses and analyst forecasts predicting the same, as far back as analysts go, manufacturing forecast I suspect that investors selling C3 stock today are making the right choice: C3.ai stock is a sell.
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