C3.ai ( AI ) has gained 252% so far this year.But the AI rally may make Dow Jones leader Microsoft ( MSFT ) reach a historic milestone as well.Is AI stock a buy now?
X Analysts at Morgan Stanley gave Dow Jones software stock Microsoft a price target of 415, which implies a market cap of over $3 trillion.Last week, Apple ( AAPL ) was the first company to close above that milestone.Analysts see generative AI expanding the scope of business processes that can be automated by software.
C3.ai is an important, though much smaller, player in the space of enterprise software.In the fiscal fourth quarter ended in April, subscription revenue was 79% of sales, or $56.9 million.The company saw a loss of 13 cents per share, compared with a 21-cent loss a year ago.Free cash flow from business operations was $16.3 million during the quarter.
For the fiscal year that also ended April 30, C3.ai had sales of $266.8 million, above earlier views of $264 million-$266 million.
Analysts polled by FactSet expect 19% sales growth for the fiscal year.
Shares broke out of a consolidation in March but almost immediately pulled back and slid below the 50-day moving average in April.
The stock surged 33% ahead of earnings, reported on May 30.C3.ai stock then formed a cup base and is extended from the 34.68 buy point.The stock is above its 20% profit target from that entry.
In June, shares of C3.ai rose after Oracle ( ORCL ) saw fiscal fourth-quarter sales surge on demand for cloud computing to meet generative AI demand.Enterprise software giant Oracle has invested in generative AI startup Cohere to take on competitors such as Amazon.com ( AMZN ).The company expects AI workload to continue to drive demand for cloud infrastructure.
AI Stock: Different Consumption Model In December, AI stock changed its pricing model from subscription to consumption-based pricing.
The move brought the company in line with industry standards for software-as-a-service providers.The practice is common across Amazon.com ‘s ( AMZN ) AWS, Google parent Alphabet ‘s ( GOOGL ) Google Cloud and Microsoft ‘s ( MSFT ) Azure, as well as smaller players.
Consumption pricing works like a utility bill; that is, the higher the consumption, the pricier the service.Since AI customers will benefit from having access to an AI enterprise platform with unlimited use and developer licenses, the switch to consumption pricing could drive revenue growth, but not immediately.
CEO Thomas Siebel indicated that the consumption pricing model will lower barriers to entry because companies do not have to be tied to long contracts.
Massive Artificial Intelligence Growth Siebel sees AI applications revenue hitting $600 billion, driving a fast-growing space .
That is far less than Cathie Wood’s prediction.
Artificial Intelligence News And AI Stocks To Watch
The Ark Invest chief said in her firm’s “Big Ideas 2023” report that AI could add $200 trillion to the economy by 2030.
Generative AI will increase efficiency for professionals.AI stock has first-mover advantage, touting partnerships with Alphabet, Amazon, Microsoft, Accenture ( ACN ), Baker Hughes ( BKR ) and others.
That is because generative AI helps computers apply machine learning and artificial intelligence to vast data sets, learn patterns and generate content based on those patterns.Enterprise AI makes this content specific to business needs.
Stock Surges On ChatGPT Success AI stock skyrocketed in February when users successfully tapped OpenAI’s ChatGPT artificial intelligence app to generate answers, texts, emails and even books.
The ChatGPT app reached 100 million monthly active users in two months, beating popular apps like TikTok and Instagram.
OpenAI’s partnership with Microsoft ChatGPT uses natural language to help users write emails, develop code and find answers for daily questions.
Redwood City, Calif.-based C3.ai makes AI-enabled software applications that can be configured for different purposes.The software can make networks more reliable, detecting fraud, balancing inventory and demand, solving supply chain issues and increasing energy efficiency.
It can also help defend against money laundering.
AI Stock’s IPO The enterprise software stock popped on the first day it started trading on Dec.
9, 2020, leaping from an IPO price of 42 to finish at 92.49, according to IBD MarketSmith.
The current Composite Rating of 85 is less than ideal.And the low 45 EPS Rating reflects the company’s many years of losses.The perfect 99 Relative Strength Rating indicates the stock’s superior performance compared to other stocks in the IBD database.
To find the best stocks, check out IBD Stock Lists and IBD Data Tables.
Please follow VRamakrishnan on Twitter for more news on AI stock.
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