C3.ai stock rating reaffirmed at Wolfe with $15 target

On Thursday, Wolfe Research maintained its Underperform rating on C3.ai (NYSE:AI) shares, with a steady price target of $15.00. The firm’s analysts highlighted C3.ai’s third-quarter fiscal year 2025 results, which surpassed its revenue guidance by 0.8% and reported a smaller operating loss of $19.5 million than expected. According to InvestingPro data, C3.ai currently has a market capitalization of $3.15 billion, with its stock showing significant volatility - trading at $24.74, down about 23% year-to-date. The company also raised its FY25 revenue forecast to $388.9 million, marking a 25% year-over-year increase and a slight $0.9 million bump from previous estimates. The reduced operating loss guidance now stands at $92 million, improved from the prior $120 million forecast. InvestingPro analysis shows the company maintaining strong revenue growth with a 21.7% increase in the last twelve months, though profitability remains a challenge with negative EBITDA of $301.4 million.

Wolfe Research noted that the better-than-anticipated operating loss was largely due to C3.ai’s strategic reduction in marketing expenses and an emphasis on expanding its sales and partner ecosystem. Non-BKR (non-booking, billing, and revenue) revenue grew by 43% year-over-year, with demonstration license revenue reaching $28.6 million, which is recognized upfront upon delivery. This increase was attributed to a rise in sales through channel partners and the need for comprehensive sales kits for C3.ai’s solutions.

Despite these positives, Wolfe Research expressed caution regarding the company’s growth trajectory amid its transition to a consumption model. Subscription revenue, excluding demonstration licenses, saw an approximate 8% sequential decline. InvestingPro data reveals that C3.ai maintains strong financial flexibility with a current ratio of 7.52 and minimal debt, though its overall financial health score remains weak. For deeper insights into C3.ai’s financial metrics and growth potential, investors can access the comprehensive Pro Research Report, available exclusively on InvestingPro. Furthermore, the Remaining Performance Obligations (RPO) dropped by $52 million to $208 million in the third quarter, following a significant increase in the second quarter. C3.ai closed 66 agreements during the quarter, including 47 with partners and 28 through a partnership with Microsoft (NASDAQ:MSFT).

C3.ai anticipates a positive free cash flow (FCF) in the fourth quarter of fiscal year 2025, and Wolfe Research believes this target is attainable, especially with the expected collection of receivables from its BKR agreement. However, the analysts at Wolfe Research remain cautious about the potential renewal of the BKR agreement and the impact this could have on the company’s medium-term and next-year growth, citing uncertainty and a possible risk to growth. Consequently, they reiterated their Underperform rating and maintained the price target at $15.00. InvestingPro analysis shows analyst targets ranging from $15 to $56, with 12 analysts recently revising their earnings expectations downward for the upcoming period. Subscribers can access additional ProTips and detailed financial metrics to make more informed investment decisions.

In other recent news, C3.ai reported its fiscal third-quarter earnings with revenue reaching $98.8 million, slightly surpassing the consensus forecast of $98.1 million and marking a 26% year-over-year increase. The company also posted a non-GAAP earnings per share of ($0.12), which exceeded analyst expectations of ($0.25). However, the guidance for the fourth quarter and full fiscal year 2025 was mostly in line with Wall Street’s expectations, which did not excite investors. C3.ai’s partnerships with Microsoft, AWS, and McKinsey QuantumBlack have been pivotal in driving growth, with 66 agreements closed in the quarter, including 50 pilots, reflecting a 72% increase year-over-year.

Despite these achievements, various analysts have adjusted their price targets for C3.ai. Piper Sandler reduced its price target to $28 from $42, maintaining a Neutral rating, while KeyBanc Capital Markets cut it to $21 from $29, citing concerns over the composition of revenue growth. Canaccord Genuity also lowered its target to $30 from $40, maintaining a Hold rating, and highlighted the company’s cash burn and potential growth moderation. Meanwhile, Citizens JMP revised its target to $50 from $55, retaining a Market Outperform rating, noting the mixed results of the third-quarter earnings. These adjustments reflect a cautious stance from analysts regarding C3.ai’s financial performance and future growth trajectory.

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