C3 Stock Plummets: Why We're Not Worried

C3.ai stock $AI has fallen 90% since its high of $177 a share in December 2020. Today, shares hit new lows on the back of Fiscal 2022 results and Fiscal 2023 guidance that didn't meet the lofty expectations of the market. In the call, the CEO Tom Siebel talks about why they're offering up conservative guidance, and more importantly, provides a path to profitability. Regardless of what type of investor you might be, you can feel assured that Mr. Siebel has the moxie needed to sail the C3 ship through times of crisis. We look at the C3.ai land-and-expand strategy and consider how they're measuring up to other #EnterpriseAI companies like #Palantir $PLTR. Long story short, this #software company has a clear path to profitability and a huge blue ocean TAM in front of it.
RESEARCH PIECES USED IN THIS VIDEO:
1.C3.ai Stock Plummets: Why We’re Not Worried
www.nanalyze.com/2022/06/c3-a...
2. Is C3.ai Stock an IoT Stock or an AI Stock?
www.nanalyze.com/2021/09/c3-a...
3. An Enterprise AI Showdown - C3 Stock vs. Palantir Stock
www.nanalyze.com/2021/04/ente...
4. C3.ai - An Enterprise Artificial Intelligence Stock
www.nanalyze.com/2020/11/c3-a...
CHAPTERS:
00:00 Intro
01:32 C3.ai disappoints investors
02:33 Tom Siebel's cautious approach
03:24 C3's path to profitability
04:14 Predictive enterprise AI
06:09 The land-and-expand model
06:51 C3.ai customer growth
07:31 The economic benefits of C3
09:40 C3.ai vs Palantir
11:11 Conclusion
ABOUT US:
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Read all the Nanalyze Premium articles you'd like for free! Sign up for a 30-day trial of our monthly subscription with no strings attached: www.nanalyze.com/become-a-nan...

[@josephdallao2644]

Nice video...always like your work. I could be wrong but I think the large negative reaction was forward guidance for next quarter when revenue is expected to decline sequentially from this quarter. For revenue to decline could be a serious issue as it means some customers are leaving or spending less. Seeing revenue forecast expected to decline I think was a bit of a shocker and analysts on the call tried to get to the reason and the answer was expected contracts are being delayed and pushed into follow on quarters. Analysts kept asking for more specifics but management danced around the real reason for the expected decline in revenue. With $1 bil in cash they will be around for a long time but I think no getting around that the forward guidance was disappointing.

[@Nanalyze]

Thank you for the feedback! You are right. We didn't focus on the next quarter guidance and probably should have mentioned that as a contributing reason for the drop. Revenue declining is indeed a problem if customers aren't finding the "economic value" to be sufficient to justify the cost. Good comment Joseph, thank you for the perspective.

[@neel-uronchondi9339]

Holding 150 shares at $26

[@Nanalyze]

Good job getting in at a much lower cost basis than we're sitting at. You are 32% below your cost basis which is small potatoes in today's volatile markets. Always use dollar cost averaging which helps avoid market timing!

[@Cyclops0000]

Been sitting on some cash ready to deploy for a while now. C3 has been on my radar for some time so I'll check for any red flags but based on your vid it seems very promising.

[@Nanalyze]

Tom Siebel's proven ability to build and exit a enterprise software business during difficult times makes this seem like quite a compelling way to play enterprise AI.

[@BNSFFoamer]

Great video and detailed analysis!

[@Nanalyze]

Really appreciate the feedback Martin!

[@SushrutIkhar]

One thing we'd like to see less for C3 is the initial outlay cost so that they are able to add new logos much easily

[@joepiv]

Makes sense. Palantir subsidizes new customers in this manner. Note that Mr. Siebel emphasized that getting new logos isn't a priority in the same way it is for other firms, so - whether right or wrong - that probably won't be a priority for them. Perhaps their strategy is to master each industry vertical by scaling a handful of customers (depth) and work out all the kinks. Then, open up the floodgates and expand (breadth). We just want to see no single customer account for more than 10% of revenues as a start.

[@EzraWildes]

Thanks!! What are your thoughts on the massive amounts of insider selling? Even recently there seems to be more selling at this presumably low price. That, coupled with the apparent lack of revenue growth so far, are what’s holding me back from a story I’m bullish on. Thoughts?

[@Nanalyze]

You are quite welcome Ezra! "Massive amounts of insider selling" needs to be quantified and put into context. A guy who was just awarded 200,000 shares decides to sell 5,000 shares and take some money off the table. That's very different from the CEO selling 30% of his holdings in the company in a short time frame. For each sale you need to define context, which is why we don't pay attention to this noise for stocks we're bullish or bearish on. It's often like reading tea leaves. As for revenue growth at 22% guidance vs. the 33% expected, Mr. Siebel said he's being conservative in estimating growth given the current market conditions. Let's see what happens and hope revenue growth surprises.

[@seanmeyers2386]

How would they compare to bbai

[@Nanalyze]

No comparison. Apples to oranges. That's based on a cursory look at BBAI which is a small SPAC that has mainly dealt with the government and is extremely vague about what they do. The language in their investor deck and filings seems odd as well. Haven't heard of them and would avoid.

[@danielgurarie3255]

Love your videos. Do you still like the stock these days?

[@Nanalyze]

Be very wary of the AI hype right now. We talked about this in today's newsletter to Nanalyze Premium subscribers. The short of it is that this stock is surging because the letters "AI" are in the name and - of course - the ticker is AI.

[@danielgurarie3255]

@@Nanalyze thank you. How can I sign up to your newsletter?

[@Nanalyze]

No problem. Our free newsletter is here and a good place to start: www.nanalyze.com/nanalyze-weekly/

[@glitchlife4639]

Is there any insider buying?

[@Nanalyze]

We didn't check that, but haven't found these signals to be reliably predictive.

[@tomas.bednar]

June 29 - CFO Parkkinen buys 194k shares for 3.56M

[@arildschonberg3607]

The reason why Palantir is more highly valued, it’s because they have just become profitable. C3 has still a few years to go before they become profitable.

[@Nanalyze]

Yep, today's uncertain market clearly rewards profitability. However, C3 has a path to profitability with decent gross margins of 70%, so we're not too worried in our long-term view. -Wyatt C.

[@joepiv]

In our opinion, investors are ascribing WAY too much value on profitability for Palantir. If you have several billion dollars in cash and 80% margins, the only thing investors should care about is growth. Profitability should be a given with margins like that and survivability just isn't a concern in that case. If your cash stockpile is dwindling and you have lower margins, then profitability becomes a concern over growth.

[@arildschonberg3607]

Yes, the stock market is overly concerned about profitability. That’s why we can act on the same premises. Buy shortly before you see a company become profitable and and sell shortly thereafter, when the market overreacted.

[@Nanalyze]

@@arildschonberg3607 We don't jump in and out of the markets like that. Good way to lose money in the long run.

[@sublyme2157]

When Microsoft invested $10 billion into OpenAI, that was the end of the AI competition. Microsoft runs the gamut of IT, I cannot think of a single thing they're not in. They're the air we breathe. And now every facet of the company, from their operating systems, their apps, email, cloud, data, intelligence, security, search, cloud computing and storage, and every conceivable acronym that has "as a service" in its name will have abundant, rich, useful features of the world's most popular AI platform built in. At this point the best thing that can happen to the remaining companies is to be bought by a larger fish. I may be completely wrong, it's hard to predict the future, but this is why I wouldn't invest in any AI company.

[@Nanalyze]

Interesting theory. Microsoft is certainly the big fish in this realm. However, as a $1 trillion + company, Microsoft also has a lot of room to fall if they can't keep innovating. Their investment in OpenAI feels like a great way to innovate. -Wyatt C.

[@sublyme2157]

@@Nanalyze Oh yeah, they can't stay on top forever :) Everybody uses Microsoft products, but very few love them. Just need a competitor to break into the corporate space.

[@joynalmiah8864]

You still think the stock is not dead?

[@Nanalyze]

Not sure what that means as we invest in companies, not stocks. ;) Here's our most recent piece on C3: www.nanalyze.com/2023/04/c3-stock-falls-accounting-challenges/

[@joynalmiah8864]

@@Nanalyze Sorry I meant the company. I will have a read :)