C3.ai Shares Slump 10% as Company Forecasts Bigger Operating Loss
In premarket trading on Thursday, C3.ai saw its shares slump 10% after the company announced a forecast of a bigger fiscal 2024 operating loss. The decline comes as the company ramps up investments in its generative artificial intelligence solutions.
The broader software industry has been hit by weaker spending from enterprises grappling with high interest rates. However, AI has remained a bright spot in this challenging environment.
The AI application software firm revealed that it is seeing sales cycles prolonging as customers create new governance functions to approve AI applications before use, effectively delaying clients’ decision-making process. Additionally, growing spending on pilot programs with potential customers has added pressure on the company’s profitability outlook.
Brokerage D.A. Davidson & Co responded to the news by cutting its price target on the stock to $28 from $30, citing the deterioration of profitability.
The average rating of 14 analysts covering the stock is “hold”, and their median price target is $28, according to LSEG. C3.ai also has a short interest of 29.71% of its outstanding shares as of November 15, according to Lynx Insights data.
Despite this setback, C3.ai has seen its shares gain over 160% so far this year, driven by a surge in interest in AI-linked stocks after chatbot ChatGPT’s successful launch late last year. The stock is a popular name among retail traders and was among the top ten trending stocks on Thursday on the amateur investor-focused website Stocktwits.
On Wednesday, C3.ai said it expects its annual adjusted operating loss to be between $115 million and $135 million, compared with its prior forecast of $70 million-$100 million. Additionally, the company’s revenue of $73.2 million in the second quarter ended Oct. 31 missed LSEG estimates of $74.3 million, as the company saw sales decline in Europe, the Middle East, and Africa.
(Reporting by Chavi Mehta in Bengaluru; Editing by Krishna Chandra Eluri)