A Soaring Flight: C3.ai’s Journey
The year 2023 has been nothing short of a roller coaster for C3.ai (AI -0.18%). A staggering 266% rise in shares, a shift in business models, and a future filled with potential. But is this high-flying AI play worth the investment? Let’s dissect the facts.
The Rise and Stumble
C3.ai’s journey has been marked by triumphs and trials. The company’s shift from a subscription-based model to a consumption-based one was a bold move. It aimed to lower the entry barrier for new customers, streamline negotiations, and expedite deals. But it came at a cost.
The loss of revenue visibility and a flat growth rate raised eyebrows. A sales multiple of 17 with a mere 5.6% increase in revenue to $267 million in fiscal 2023 was a significant drop from the previous year’s 38% growth. The question loomed: Was the hype around AI justifying the stock’s rich valuation?
The Turnaround
C3.ai’s guidance for fiscal 2024 paints a promising picture. The change in business models seems to be working. The number of qualified sales opportunities has doubled, and the sales cycle has shortened.
With revenue expected to land at $307.5 million in fiscal 2024, a 15% increase over the prior year, and the possibility of hitting $320 million, the company is on the right track.
The Future
The enterprise AI market is poised for growth, with estimates suggesting an annual growth of almost 35% through 2030. C3.ai is tapping into a $155 billion opportunity.
The three-fold jump in pilot agreements and the increase in deals signed in the first quarter of fiscal 2024 indicate that C3.ai is moving in the right direction. The potential acceleration in growth and the vast market opportunity place C3.ai in a solid position to justify its valuation.
Conclusion
C3.ai’s rich price-to-sales multiple is a concern, but the company’s growth trajectory and the enormous opportunity in the AI market make it an attractive investment. Growth investors looking to capitalize on AI software might find C3.ai a promising venture, despite its current valuation.
