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Analyst Read: C3.ai

A look into the newly IPO'd C3.ai.
(WhiteMoca)
(WhiteMoca)
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The top-voted topic in last night’s livestream was for me to take a quick look at the newly IPO’d C3.ai ($AI)

C3.ai is an enterprise AI software company that provides software-as-a-service (SaaS) applications that enable the deployment of AI applications at a large scale on Azure, AWS, IBM, Google Cloud, or on-premise. Obviously this is a “sexy” company in a time when many investors want to “get in” on artificial intelligence. You know, because it’s “the future”.

Anyways, C3.ai earned $164 million in revenue and $124 million in gross profit (75% margins) over the last 12 month period. They had 71% growth for the fiscal year ended April 30, 2020, yet they’re only up about 11% so far since then. Maybe corporations deploying AI aren’t buying during the pandemic?

At $118 per share, $AI is trading at an $11.4 billion valuation. Even if you assume they pick up their 71% growth going forward, they’re trading at a 54x forward Gross Profit valuation, which is entirely too expensive. I even have trouble with Crowdstrike ($CRWD), which is growing steadily at 80% and trades at 42x forward Gross Profit. 

I’m not saying that $AI can’t pump even higher on IPO and buzzword-driven mania (like Snowflake), but from an analytical perspective, I don’t know how anyone can justify owning this stock.

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