1) C3.ai, Inc. (NYSE:AI)
Share Price as of September 20: $23.25
Short % of Float (As of August 30): 28.69%
Number of Hedge Fund Holders: 18
C3.ai, Inc. (NYSE:AI) carries out operations as an enterprise artificial intelligence (AI) software company in North America, and internationally.
Short sellers believe C3.ai, Inc. (NYSE:AI) has concerns about its ability to accelerate growth. The key area of concern remains the slowdown in subscription revenue growth. It saw a growth of only 20% YoY in 1Q 2025 to $73.5 million compared to a ~41% jump in the previous quarter. This deceleration weighed over the company’s stock performance, mainly in the context of tightening corporate budgets for IT and software amid macroeconomic concerns. This also highlights the risks and challenges in expanding the customer base and converting its pilot programs to long-term contracts.
C3.ai, Inc. (NYSE:AI)’s optimistic outlook has not been translated into consistent and scalable revenue. C3.ai, Inc. (NYSE:AI) expects short-term pressure on gross margins as a result of the increased cost of pilot programs. Moreover, the investments to scale the business might impact its operating margins in the near term.
On the other hand, Wall Street analysts continue to remain optimistic about the company’s growth prospects. They believe that the deceleration in the subscription revenue growth appears to be temporary and that the focus should be on revenue growth. In 1Q 2025, its total revenue came in at $87.2 million, exhibiting an increase of 21% compared to $72.4 million a year ago. This marks 6th consecutive quarter of accelerating revenue growth, pointing to the growing adoption of its enterprise AI offerings.
C3.ai, Inc. (NYSE:AI) has made significant strides when it comes to expanding its footprint throughout the public sector. The company signed 25 agreements with the state and local governments. Its federal business continues to do well, as the segment represented more than 30% of its bookings. The company made a new and expanded deal with the US military. The launch of C3 Generative AI for government programs demonstrates the likelihood of strong growth.
Northland Securities upped the shares of C3.ai, Inc. (NYSE:AI) from a “Market-perform” rating to an “Outperform” rating, giving a price target of $35.00 on 30th May. The company was held by 18 hedge funds, as per Insider Monkey’s 2Q 2024 data.
Investment management company, Bireme Capital, recently released its fourth-quarter 2023 investor letter. Here is what the fund said:
“Our final new short position is in a company called C3.ai, Inc. (NYSE:AI). Originally named “C3 Energy,” C3.ai has changed its name multiple times based on whatever hot new trend they were supposedly capitalizing on. The “energy” theme was about smart grid and cap-and-trade. Then the firm changed its name to “C3 IoT” to attempt to capitalize on the Internet of Things buzz. After that trend fizzled out, the moniker was altered once more, with the company capturing the “AI” ticker in December 2020 – a savvy move if it wants to sell stock to credulous investors, but irrelevant to its business prospects. As Kerrisdale put it, the company is a “minor, cash burning consulting and services business masquerading as a software company.”
While we acknowledge the potential of AI as an investment, our conviction lies in the belief that some deeply undervalued AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for a deeply undervalued AI stock that is more promising than the ones mentioned on our list but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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