C3.ai, Inc.

C3.ai, Inc. (NYSE: AI) is a software company that provides enterprise artificial intelligence (AI) solutions. The company's flagship product is the C3 AI Suite, a cloud-based platform that enables businesses to build, deploy, and manage AI applications. Its business model is based on a subscription-based pricing model. Customers pay a monthly or annual fee to access the C3 AI Suite. The fee includes access to the platform, as well as support and maintenance services. C3.ai's target market is large enterprises that are looking to adopt AI to improve their business operations.

Key Highlights

• Growing rapidly but losses are also expanding: The companies have recorded healthy topline performance over the past 3-year, revenue has moved from ~USD92 million in FY19 to ~USD253 million in FY22, implies a CAGR rate of 40.1% between FY19 to FY22. However, Net losses have also increased from USD 33.35 million in FY19 to USD 192.06 million in FY22.
• Lower Balance Sheet risk: As of March 31, 2023, C3.ai, Inc. had no long-term debt. The company had USD147.8 million in cash and cash equivalents, and USD 1.1 billion in total assets. This gives C3.ai a debt-to-equity ratio of 0%. This means that C3.ai is not reliant on debt to finance its operations and carry a robust balance sheet.
• Competitive Strength: The company’s competitive advantage is its focus on enterprise AI. The company's platform is designed to meet the needs of large businesses, and it offers a wide range of features and functionality that are not available from other AI platforms.
• Diverse Client base: The company has a number of customers in a variety of industries, including manufacturing, energy, financial services, and healthcare.

Technical Highlights

• Trading at 3-times deviation to its 20-day SMA: On daily price chart, AI shares are trading at a 3-times valuation of the 20-day SMA and trading ~20% above the upper band of the Bollinger Band©. This implies a potential pullback from the current trading level in the short term.
• 14-day RSI Charted into an Overbought zone: On the daily price chart, the leading momentum indicator 14-day RSI is hovering in deep oversold zone with 14-day RSI at 84.61, implies a potential pull-back from the current trading level.
• Long-term trend is bullish: AI shares are trading well above the crucial short-term as well as long-term SMAs of 20-day, 50-day, 100-day and 200-day EMAs on both weekly as well as daily price chart, which indicates a long-term bullishness in the stock.

Stock Recommendation

C3.ai is a relatively new company, but it has already achieved healthy growth over the past three few years on the back of the strength of its platforms that are not available from other AI platforms. Further its shares have recoded a strong surge over the past 1-week with stock moved approximately 62%, up ~147% in 1-months and ~258% in the past six months respectively. Further, its shares have charted into an overbought territory on both daily as well as weekly price chart, implies a potential pullback from the current trading levels. Hence, based on the above rationale, a ‘Watch’ rating has been given C3.ai, Inc shares at the closing price of USD 43.96 as of May 30, 2023.

Individuals can evaluate the stock based on the support and resistance levels provided in the report in case of keen interest taking into consideration the risk-reward scenario. 

Markets are trading in a highly volatile zone currently due to certain macro-economic issues and prevailing geopolitical tensions. Therefore, it is prudent to follow a cautious approach while investing. 

Related Risk: This report may be looked at from a high-risk perspective and a recommendation is provided for a short duration. This report is solely based on technical parameters, and the fundamental performance of the stocks has not been considered in the decision-making process. Other factors which could impact the stock prices include market risks, regulatory risks, interest rates risks, currency risks, social and political instability risks etc. 

How to Read the Charts?

The Green colour line reflects the 21-period simple moving average (SMA) while the red line indicates the 50- period simple moving average (SMA). SMA helps to identify existing price trends. If the prices are trading above the 21-period and 50-period moving average, then it shows prices are currently trading in a bullish trend.

The Black colour line in the chart’s lower segment reflects the Relative Strength Index (14-Period) which indicates price momentum and signals momentum in trend. A reading of 70 or above suggests overbought status while a reading of 30 or below suggests an oversold status.

The Blue colour bars in the chart’s lower segment show the volume of the stock. The volume is the number of shares that changed hands during a given day. Stocks with high volumes are more liquid than stocks with lesser volume as liquidity in stocks helps in easier and faster execution of the order.

The Orange colour lines are the trend lines drawn by connecting two or more price points and used for trend identification purposes. The trend line also acts as a line of support and resistance.

Technical Indicators Defined: -

Support: A level at which the stock prices tend to find support if they are falling, and a downtrend may take a pause backed by demand or buying interest. Support 1 refers to the nearby support level for the stock and if the price breaches the level, then Support 2 may act as the crucial support level for the stock. 

Resistance: A level at which the stock prices tend to find resistance when they are rising, and an uptrend may take a pause due to profit booking or selling interest. Resistance 1 refers to the nearby resistance level for the stock and if the price surpasses the level, then Resistance 2 may act as the crucial resistance level for the stock. 

Stop-loss: It is a level to protect further losses in case of unfavourable movement in the stock prices. 

The reference date for all price data, currency, technical indicators, support, and resistance levels is May 30, 2023. The reference data in this report has been partly sourced from REFINITIV. 

Abbreviations

CMP: Current Market Price

SMA: Simple Moving Average

RSI: Relative Strength Index

USD: United States dollar 

Note: Trading decisions require a thorough analysis by individual. Technical reports in general chart out metrics that may be assessed by individuals before any stock evaluation. The above are illustrative analytical factors used for evaluating the stocks; other parameters can be looked at along with additional risks per se. Past performance is neither an indicator nor a guarantee of future performance.

Disclaimer

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