Equities of C3.ai collapsed by 65% - the bubble burst?
IPO C3.ai - developer of artificial intelligence technologies for companies, held in December 2020. AI shares were in high demand, making their value almost double by the end of the month. However, at the moment they are trading at 65% below the maximum marks.
In the third quarter of 2021 (published in March), subscription revenue increased by 23% a year to $42.7 million. In the next quarter, management expects to increase revenue by 22% y/y, to $50 million, resulting in annual revenue for the entire fiscal year 2021 to be $181 million (+15% y/y). By comparison, in 2020, revenues grew by 71%. Of course, such a low growth rate does not correspond to a high fundamental estimate: the forward P/S ratio is 40x.
Solutions C3.ai they help to significantly increase the efficiency of work. In a recent presentation, it was said that the created software helped the bank from the “Fortune 50 " to increase the volume of daily trading by $14 billion. Interest in services C3.ai they develop from different industries. Another client, a Fortune 500 medical equipment manufacturer, increased its output by 300% after implementing specially developed software.
Management relies on attracting large clients from various industries, who then act as partners, offering services C3.ai to its counterparties. In particular, such an agent is the oil and gas giant Baker Hughes.
This strategy can bring financial benefits in the long term. Wall Street expects revenue from 2022 C3.ai it will accelerate and grow at a rate exceeding 30% per year. However, investors should prepare for increased volatility, as they have little faith in success. C3.ai market participants, as we can see from the dynamics of the shares, do not.
In addition, an important risk is the high dependence on large customers: three users account for 45% of all revenue. Their loss should have a very negative impact on the financial results C3.ai.