C3.ai (AI, Financial) shares are experiencing a significant drop following the release of its fiscal first-quarter earnings report, which contained disappointing guidance. The stock price decreased by 14.52% to $19.67.
For the first quarter, C3.ai (AI, Financial) reported a 21% revenue increase to $87.2 million, exceeding expectations of $86.9 million. The company also closed 71 agreements, a substantial 122% increase year over year, marking its sixth consecutive quarter of accelerating revenue growth.
Despite this positive revenue momentum, C3.ai remains unprofitable. The company's GAAP operating loss slightly improved from $74.1 million to $72.6 million year over year. With a stock-based compensation expense of $54.7 million, the adjusted per-share loss was $0.05, better than the consensus estimate of $0.13 and an improvement from a loss of $0.09 in the previous year.
Looking forward, C3.ai projects its second-quarter revenue to fall between $88.6 million and $93.6 million, which aligns with the consensus and reflects a 24.4% increase at the midpoint. However, the company also anticipates the adjusted operating loss to expand to a range of $26.7 million to $34.7 million, indicating ongoing challenges with achieving profitability.
Investors are growing increasingly concerned about C3.ai's ongoing lack of profits and potential share dilution, despite the steady growth in revenue.
In terms of stock analysis, C3.ai (AI, Financial) has several warning signs. The stock has five severe warning signs and one medium, including declining revenue per share and gross margin, long-term declines in operating margin, and challenges in collecting payments (days sales outstanding). Additionally, there has been insider selling activity, with recent insider transactions indicating no insider buying over the last three months.
On the positive side, C3.ai demonstrates strong financial strength, with a robust Altman Z-Score of 9.69, indicating low bankruptcy risk. The company's Beneish M-Score of -3.61 suggests it's unlikely to be manipulating earnings. The price-to-sales (PS) ratio is close to a 1-year low of 8.17, which may present a buying opportunity for value investors.
According to the GF Value assessment, C3.ai is currently significantly undervalued with a GF Value of $28.52, suggesting a potential upside if the company can tackle its profitability issues.
In conclusion, while C3.ai (AI, Financial) continues to grow its revenue and close significant agreements, its persistent lack of profitability and insider selling are notable concerns for investors. Nevertheless, the stock's substantial undervaluation by the GF Value metric may attract those looking for speculative growth opportunities in the artificial intelligence software industry.
