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On Thursday, DA Davidson adjusted its outlook on C3.ai (NYSE:AI) shares, reducing the price target to $25 from the previous $40, while keeping a Neutral stance on the company’s stock. The revision follows C3.ai’s latest earnings report, which indicated a modest slowdown in revenue growth, though InvestingPro data shows the company still maintained a healthy 21.73% revenue growth rate. With analyst targets ranging from $15 to $56, and 12 analysts recently revising earnings downward, investors seeking deeper insights can access comprehensive analysis through InvestingPro’s detailed research reports. Despite this deceleration, the company continued to see steady subscription growth, bolstered by software license demonstration purchases made by its distribution partners during the quarter. According to InvestingPro data, C3.ai maintains strong liquidity with a current ratio of 7.52, and holds more cash than debt on its balance sheet, providing financial flexibility for continued growth initiatives.
The firm noted that C3.ai’s recent initiatives, including new and expanded partnerships with industry giants such as Microsoft (NASDAQ:MSFT), AWS, and McKinsey, are beginning to bear fruit. These collaborations have been credited with enabling faster sales cycles for C3.ai, expanding its sales pipeline, and contributing to an increase in closed agreements. While the company’s gross profit margin stands at a robust 59.71%, InvestingPro analysis indicates the company faces profitability challenges, with analysts not anticipating profitability this year. These positive developments are seen as early signs of success for the artificial intelligence software company.
DA Davidson’s analysis acknowledges the potential benefits of C3.ai’s strategic alliances in the technology sector. The partnerships are aimed at enhancing the company’s market reach and improving sales efficiency, which could be pivotal for future growth. The firm’s decision to maintain a Neutral rating suggests a cautious but not pessimistic view of the company’s stock performance in the near term.
The lowered price target reflects adjustments in expectations after considering the company’s reported financials and market conditions. C3.ai’s ability to sustain its subscription growth amidst a revenue growth deceleration has been a key observation in the firm’s assessment.
DA Davidson’s latest commentary on C3.ai highlights the importance of strategic partnerships in driving sales efficiency and expanding business opportunities for tech companies. The firm’s revised price target and maintained Neutral rating provide investors with an updated perspective on C3.ai’s market position following its recent earnings report. With the stock showing significant volatility and trading at a high revenue multiple, investors can access more detailed valuation metrics and 10+ additional ProTips through InvestingPro’s comprehensive research platform.
In other recent news, C3.ai reported its third-quarter fiscal year 2025 results, surpassing revenue guidance by 0.8% and reducing its operating loss to $19.5 million, which was better than expected. The company raised its fiscal year 2025 revenue forecast to $388.9 million, indicating a 25% year-over-year increase. However, C3.ai’s transition to a consumption model has led to a sequential decline in subscription revenue and a drop in Remaining Performance Obligations (RPO) to $208 million. Despite these challenges, C3.ai secured 66 agreements during the quarter, including partnerships with Microsoft, AWS, and McKinsey QuantumBlack, which have been pivotal in driving growth.
Analysts have been adjusting their outlooks on C3.ai. Wolfe Research reaffirmed an Underperform rating with a $15 price target, citing concerns about the company’s growth trajectory. Piper Sandler reduced the price target from $42 to $28, maintaining a Neutral rating, while KeyBanc Capital Markets lowered their target from $29 to $21, retaining an Underweight rating due to concerns over the decline in non-demo subscription revenue. Canaccord Genuity also revised its price target from $40 to $30, keeping a Hold rating amid concerns about cash burn and growth moderation.
Meanwhile, Citizens JMP adjusted their price target to $50, down from $55, but maintained a Market Outperform rating, highlighting mixed third-quarter results. C3.ai’s non-GAAP earnings per share were better than expected, and revenue slightly exceeded forecasts, yet the company faced a larger-than-anticipated free cash flow deficit. These developments reflect a cautious yet optimistic outlook from analysts regarding C3.ai’s future performance.
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