C3.AI: Could The Stock 10x? Or Is It All Hype?

What happens when an AI stock plunges 87%, even while the industry is booming? Meet C3 AI – an AI company with steady revenue growth since its IPO, but has a stock price that’s been sliding for years.

Is this one of the biggest bargains in AI stocks, or a trap ready to burn your money? Let’s find out.

What is C3.ai?

C3 AI is a software company that was founded in 2009 and went public in 2020. It was initially called C3 Energy, and later rebranded as C3 AI, in line with the recent AI revolution.

Currently, the company offers AI solutions across various industries and has partnered with prominent names such as Shell Global, Microsoft, Amazon, and many others. The company provides AI solutions for nearly every enterprise need, including tools for demand forecasting, inventory optimization, real estate property appraisals, and more. 

Now, let’s talk about the stock. 

After its IPO back in December 2020, C3’s share price reached an all-time high of around $185 per share. But just a few months later, the stock fell sharply, and it’s been trending downward ever since. At the time of this recording, the stock trades at around $24 per share, which is more or less 87% down from its all-time high. 

Given how other AI stocks have surged during the AI boom, C3’s performance raises some big questions.

Financial Health Check

 The company’s financial performance over the years is a mixed bag, and might explain things

In 2024, C3 AI reported annual revenue of $389 million, which was up 25% compared to the previous year. Most importantly, the majority of this revenue came from subscriptions, precisely what you want to see in a software business.

Also, the company has been increasing its annual revenues since its IPO, which is excellent.

However, at the same time, the company is experiencing a series of “increasing net losses” over the same period. In 2024, its annual net loss was $279 million, which is higher than the preceding years.

But if you look closer, C3 has been pouring hundreds of millions into sales, marketing, and R&D, which is the most significant driver of its ongoing net losses.

Bullish Scenario

So you might be wondering, how can the company and its stock soar? Let’s look at the best possible cases for C3.ai

First is its Continuing Partnerships

 The company has maintained its long-standing partnership with energy technology company Baker Hughes, which began in 2019, and is said to continue through 2028. This partnership has enabled the delivery of Enterprise AI solutions to other major oil companies, including Shell, Eni, QatarEnergy LNG, Petronas, ExxonMobil, and others.

The company has also been awarded a higher ceiling for its Enterprise AI solutions for the US Air Force. The initial ceiling of $100 million has now hit $450 million following the successful deployment of PANDA. This predictive maintenance platform tracks available components for hundreds of aircraft, with the potential to increase aircraft availability by up to 25%. Its strong partnership with Microsoft Azure, Amazon Web Services, and McKinsey QuantumBlack enhances its reach, allowing it to service the growing enterprise AI market.

All in all, the past year has been busy as C3.ai has been able to close 264 agreements, representing a 38% increase from the previous year.

Second is its Focus on Generative AI

C3 has launched 28 domain-specific AI models – another key source of revenue. These models are engineered to handle both structured and unstructured data; they can easily be deployed to assist in usual support tasks like search, summarization, and customer support.

Third is the company’s Strong Cash Balance.

Recent financials show that they now have $742 million in cash, cash equivalents and marketable securities, all of which the company can leverage for their operations in the coming years. This, coupled with new partnerships with the military, will further augment these reserves, allowing for more runway for the succeeding years.

Risks to Consider

From here, it may sound unstoppable, but let’s talk about the risks and some issues C3 has.

The first one is its Continuous Unprofitability.

Since 2020, C3 has yet to achieve profitability and continues to struggle with significant losses, despite new partnerships and consistent revenue growth. These losses are primarily due to high expenses, but no one knows how long that will last.

Then, there’s the Issuance of New Outstanding Shares.

Given the company’s weak financials, it’s been issuing more shares to fund its operations and projects. The float is currently at 132 million shares, nearly double the 73.55 million shares it had when it debuted back in 2019.

Last but not the least is the Competitive Enterprise AI Market.

The AI market is highly competitive, and C3 faces constant challenges from giants like IBM, Microsoft, and Amazon. Though some of which are also its partners. In the generative AI segment, they need to compete with OpenAI’s ChatGPT, Meta’s Llama, Google’s Gemini, and many more open-sourced AI models. I think C3.ai needs to make its offerings more appealing so it can further extend its reach.

Final Thoughts

Even with the stock price in the $25- $26 range, about half of its high target of $50, analysts still rate this stock as a hold, and I have to agree. Profitability is key, so it’s no surprise that many long-term investors are looking elsewhere for their AI plays.

However, with some growth prospects on the horizon, the coming quarters could present a buying opportunity. If the stock drops below $20, then it might be worth a look as a speculative trade.

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