On Thursday, Morgan Stanley adjusted its outlook on c3.ai (NYSE:AI) stock, reducing the company's price target to $21 from the previous $23 while maintaining an Underweight rating. The firm noted that, despite revenue acceleration for the sixth consecutive quarter, the increase was propelled by services rather than software sales, which fell short of consensus expectations.
The analyst acknowledged c3.ai's robust momentum in signed agreements, pilot programs, and partner contributions. However, the company's revenue growth and operating margins did not meet Morgan Stanley's standards, leading to the continuation of the Underweight rating for the stock.
c3.ai, which specializes in enterprise AI applications, has been under scrutiny by investors as they assess the company's performance in a competitive and rapidly evolving market. The adjusted price target reflects the firm's cautious stance on the company's future financial performance.
The assessment by Morgan Stanley comes at a time when tech companies are facing intense pressure to demonstrate sustainable growth and profitability. c3.ai's ability to convert its agreements and pilot programs into long-term, lucrative contracts will be critical for its success.
Investors in c3.ai will be watching closely to see how the company adapts to market demands and whether it can improve its software revenue to align with the overall growth in services. The new price target represents Morgan Stanley's current view on the value and prospects of c3.ai in the market.
In other recent news, C3.ai (NYSE:AI), Inc. experienced a significant shift in its financial performance. The company reported a first-quarter adjusted loss of $0.05 per share, surpassing analyst estimates of a $0.13 loss. Its quarter revenue was $87.2 million, slightly above the consensus estimate of $86.94 million, marking a 21% YoY growth from $72.4 million.
However, C3.ai issued a softer outlook for the second quarter and full fiscal year 2025, forecasting revenue between $88.6 million and $93.6 million and full-year revenue between $370 million to $395 million.
DA Davidson, an independent analyst firm, adjusted its price target for C3.ai to $20.00, down from the previous $30.00, while maintaining a neutral rating on the stock. The firm cited a decline in subscription revenue as the primary reason for the adjustment. Despite this, C3.ai has seen positive trends in state and local government sectors, announcing several significant agreements and introducing a new generative AI solution aimed at government programs.
C3.ai also reported a positive free cash flow of $7.1 million for the quarter and maintains a strong cash position with $762.5 million in cash, cash equivalents, and marketable securities. These are recent developments that reflect the company's business performance and direction.
InvestingPro Insights
InvestingPro data reveals that c3.ai (NYSE:AI) holds a market capitalization of $2.92 billion, with a negative P/E ratio of -9.9, indicating that investors are weighing its future growth prospects against current unprofitability. Despite the company's revenue growth over the last twelve months of 16.41%, the firm's operating income margin was deeply negative at -102.5%, underscoring the challenges it faces in achieving profitability.
One notable InvestingPro Tip is that c3.ai maintains more cash than debt on its balance sheet, which could provide a cushion for operational flexibility and investment in growth initiatives. Additionally, the company's liquid assets exceed its short-term obligations, suggesting a solid position to cover immediate financial responsibilities. However, analysts remain cautious as they do not anticipate the company will be profitable this year, and the stock price has experienced significant volatility, with a 24.71% decline over the last three months.
For investors looking for a deeper dive into c3.ai's financial health and future prospects, InvestingPro offers additional insights and tips. There are currently 6 more tips available on InvestingPro, which can be accessed at https://www.investing.com/pro/AI. These tips could provide valuable context for Morgan Stanley's adjusted outlook and help investors make informed decisions regarding their investment in c3.ai.
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