C3.ai gains as Oppenheimer upgrades on 'accelerating growth,' margin expansion
Nov. 21, 2023 9:02 AM ET
By: Chris Ciaccia, SA News Editor
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C3.ai (NYSE: AI) shares rose 2.5% in premarket trading on Tuesday as investment firm Oppenheimer upgraded the enterprise software company, citing expectations for "accelerating growth" and margin expansion.
Analyst Timothy Horan raised his rating on C3.ai ( AI) shares to outperform from perform, along with a $40 price target, noting that he expects fiscal 2023 and 2024 revenue to be 1% and 4% above consensus, respectively.
He noted that since initiating coverage on the stock in late June, shares have underperformed, even as revenue growth has accelerated.
"The 'AI' theme is real and durable, with C3.ai well-positioned as one of the few pure plays helping customers drive new revenue sources/major productivity improvements; should accelerate growth into '25E," Horan wrote in an investor note.
Horan added that companies are not willing to be left behind when implementing artificial intelligence and following the developer days from OpenAI and Microsoft ( MSFT), enterprises have seen additional clarity and return on investment, which bodes well for C3.ai ( AI).
He said that C3.ai ( AI) is benefiting from the halo effect of Microsoft ( MSFT) pushing Copilot, as it shows "practical" applications of AI.
"Additionally, Microsoft's extensive data lakes, robust multicloud connectivity, stringent security compliance systems, and effective intellectual property protection have alleviated enterprise concerns, which C3.ai can piggyback, though we are still early in building the tools/foodchain," Horan explained.
Additionally, he said that recent moves by Microsoft ( MSFT) should help AI commercialization, including product upgrades and cutting processing costs. And with the expected release of ChatGPT 5.0 sometime in the next six months or so, along with the drama surrounding Sam Altman's ouster at OpenAI, these should all be "positive triggers" for C3.ai ( AI), Horan said.
The upgrade comes one day after it was reported that C3.ai ( AI) was cutting jobs across multiple departments due in part to employee performance and cost savings. |
