C3.AI Stock is Approaching Bargain Territory

Enterprise artificial intelligence application software company C3.AI NYSE: AI stock has been in a terrifying sell-off hitting lows of $36.33 all the way from a high of $183.90 nearly a year ago. The Company has partnered with Google Cloud NASDAQ: GOOG and Microsoft NASDAQ: MSFT for major wins integrating its software platform. The stock was trading well ahead of itself in the $180s, but as shares have collapsed into the $30s, it’s entering bargain territory. The growth of the metaverse, cloud migration, aerospace to process optimization, artificial intelligence will play a key role moving forward. C3.AI is well positioned near the head of the pack. Risk tolerant investors seeking exposure in this technology can watch for opportunistic pullbacks in shares.

Fiscal Q1 2022 Earnings Release

On Sept. 1, 2021, C3.AI released its fiscal first-quarter 2022 results for the quarter ended July 2021. The Company reported GAAP earnings-per-share (EPS) loss of (-$0.37) versus a loss of (-$0.28) consensus analyst estimates, a (-$0.09) miss. Revenues grew 29.5% year-over-year (YoY) to $52.41 million, beating analyst estimates for $51.27 million.  

Inline 2022 Guidance 

C3.AI provided fiscal Q2 2022 revenue guidance in line coming in between $56 million to $58 million versus $56.18 million consensus analyst estimates. The Company sees fiscal full-year 2022 revenues between $243 million to $247 million versus $245.36 million.

Conference Call Takeaways

C3.AI CEO Tom Seibal set the tone, “We ended the quarter with 89 enterprise AI customers, an increase of 85% year-over-year. As we have previously discussed, historically, our business has been characterized by quarter-to-quarter lumpiness due to the substantial size of our average order value.

Now as application sales become an increasingly large part of our revenue mix, roughly 50% of our subscriptions last quarter in Q1 accrued from application software. We are increasingly offering lower priced, high-value products like C3 AI CRM and Ex Machina. And as we've discussed, we've been diversifying our distribution model to complement enterprise selling with tele sales, distributors, market partners and direct marketplace selling. While we have not yet fully eliminated the lumpiness from our business model, we have made great progress with average subscription total contract value shrinking from $16.2 million in fiscal year 2019 to $12.1 million in fiscal year 2020 to $7.2 million in fiscal year 2021 to $4.5 million in the quarter ended July 31. It's my expectation that this average contract value will continue to increase going forward as we continue to add diversity to both our product mix and our distribution model. Our average revenue per customer in the first quarter was $535,000. Let's talk about our market partner ecosystem. We significantly expanded this partner ecosystem in Q1 entering an important highly strategic alliance with Google Cloud to allow the entire Google Cloud global sales and service organization to co-sell and service the entire family of C3 AI applications globally.”   

Google Cloud Partnership

CEO Seibal elaborated on the partnership with Google Cloud, “The two companies will tightly integrate C3 AI and Google Cloud technologies and go-to-market initiatives with the effect of accelerating enterprise AI adoption. The comprehensive alliance includes coordinated software development roadmaps, tight product integration as well as joint selling, joint marketing, and joint customer success programs at global scale. C3 AI and Google Cloud will regularly synchronize our software engineering roadmaps and activities to ensure that the Google Cloud, Google Cloud applications and the C3 AI Suite and AI enterprise applications are fully optimized and tightly integrated. The companies will engage in significant ongoing marketing development activities and will coordinate sales and service activities globally to assist small, medium, and large enterprise customers to accelerate the adoption and time to value of their enterprise cloud AI applications. We expect this partnership will dramatically accelerate the adoption of enterprise AI applications across all industry segments and will improve an additional growth engine for C3 AI. Microsoft, our partnership, our strategic partnership with Microsoft continues to expand. To-date, we have closed more than $200 million in business with Microsoft. Our joint teams are currently working a pipeline of more than $350 million in specific opportunities.”

He concluded, “We continue to grow our enterprise AI production application footprint through both new customer acquisitions and expanded use by existing customers. We had 101 discrete applications in production at the end of the first quarter, up from 67 a year earlier, operating at massive scale as of the end of the first quarter. The C3 AI Suite and Applications were integrated with roughly 850 unique enterprise and extraprise data sources. We are processing 1.7 billion predictions per day. We are managing 24 in excess of 24 trillion data elements and evaluating in excess of 33 billion machine learning features daily… So, in summary, the enterprise AI application software market is rapidly growing. We see accelerating interest in our applications across industries, geographies, and market segments. We are aggressively investing to extend our product and technology leadership to expand our market partner ecosystem and the associated distribution capacity that comes along with our ecosystem. As we continue to execute in delivering high-value outcomes for our customers, we are increasingly well positioned to establish a global leadership position in enterprise AI application software.”

AI Opportunistic Pullback Levels

Using the rifle charts on the weekly and daily time frames provides a precision view of the landscape for AI stock. The weekly rifle chart illustrates the magnitude of the dramatic sell-off from the peak near the $183.26 Fibonacci (fib) level. The weekly rifle chart has remained in a downtrend after the peak. The falling 5-period moving average (MA) resistance is at $43.73 followed by the weekly 15-period MA at $46.40. Shares have testing the weekly lower Bollinger Bands (BBs) at $38.01. The daily rifle chart is also downtrending with a falling 5-period MA at $38.75 followed by the 15-period MA at 44.87. The daily stochastic has slid under the 10-band indicating a potential move to the daily lower BBs at $34.41. The daily market structure low (MSL) buy triggers above $38.30. Prudent investors can monitor for opportunistic pullback levels at the $33.48 fib, $31.61 fib, $29.09 fib, $25.52 fib, and the $21.60 fib. Upside trajectories range from the $51.83 fib up towards the $26.85 fib level.