Shares of artificial intelligence software firm C3.ai fell sharply on Thursday after the company’s latest financial result Analysts saw a flurry of price target cuts and at least one downgrade, leaving the Street seriously disappointed.
For its fiscal second quarter ended October 31, C3.ai (ticker: AI) posted subscription revenue of $47.4 million, up 32% year on year and slightly below Street forecasts.
Shares of C3.ai fell 17.3% to $27.98 on Thursday, after setting a record intraday low of $27.90.
Total revenue was $58.3 million, up 41% from a year ago and slightly above both Company’s Guidance Range $56 million to $58 million and the Wall Street analyst consensus at $56.9 million. On a non-GAAP basis, the company lost 23 cents per share in the quarter, lower than the Street consensus estimate at a loss of 28 cents. Under generally accepted accounting principles, the company lost 55 cents per share.
There was some noise around remaining performance obligations, or RPO, which was $465.5 million, up 74% from a year ago and up 60% sequentially. However, the strong numbers were almost entirely due to the expansion of the company’s relationship with oil services firm Baker Hughes.,
The company said it has increased its total contracts from $45 million to $495 million over the next 3.5 years with guaranteed revenue of $357 million. The company said it now has 104 customers, up 63 percent from a year ago.
BofA Global Research analyst Brad Sills cut his rating on news of underperforming C3.ai shares from neutral, with a new target price of $40, down from $65. Sills writes in a research note that subscription revenue was lighter than expected. He also says that when you take back the extended Baker Hughes deal, the remaining performance obligations have actually fallen 16% from the July quarter. The analyst writes that “sales execution challenges stemming from a failed sales restructuring” impacted both subscription and RPO growth, and he sees the risk to consensus revenue growth projections.
JPMorgan analyst Mark Murphy, who already had an underweight rating on the stock, slashed his target price from $53 to $43. He cited the same factors that were listed: The company recognized that a sales restructuring failed to provide the business the expected lift, resulting in disappointing subscription revenue growth.
“While we remain constructive on C3’s technology and long-term opportunity, we think investors will be focused on monitoring its ability to digest a noisy Q2 and see a rebounding booking performance for Q3,” they write.
For the January quarter, the company is forecasting revenue of $66 million to $68 million with a non-GAAP loss from operations of $26 million to $30 million. For the April 2022 fiscal year, C3.ai sees revenue of $248 to $251 million, with a non-GAAP loss from operations of between $100 million and $108 million.
Eric J. Write Savitz to eric.sav[email protected]