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Investing.com -- Morgan Stanley slashed its C3.ai (NYSE:AI) price target to $11 from $22, while reiterating an Underweight rating on the stock.
The company’s shares edged lower in premarket trading Tuesday.
The revision follows the company’s first-quarter fiscal 2026 results, which showed a 19% year-on-year revenue decline and an 82% drop in operating margin.
In response, Morgan Stanley analysts led by Sanjit Singh lowered their estimates “to reflect the new growth trajectory and margin profile,” applying the same 27x free cash flow multiple as before but on much lower forecasts.
The revised target implies 3.2 times enterprise value-to-2026 sales, a discount to the SMid-Cap median of 4.1 times.
C3.ai shares tumbled last week after the company reported the fiscal first-quarter results and named Stephen Ehikian as its new chief executive.
Ehikian, who stepped into the role on Sept. 1, is a veteran technology leader who previously founded two firms later acquired by Salesforce.
The leadership change follows the July announcement that C3.ai was seeking a successor to Thomas Siebel, after he disclosed he had been diagnosed with an autoimmune disease that caused “significant visual impairment.”
In its base case, Morgan Stanley projects C3.ai’s revenue will reach $738 million by calendar 2034, equating to a 7% 10-year compound growth rate, with operating margins improving from -22% in 2024 to 10% by 2034.
That would yield free cash flow of $148 million, or $0.64 per share, supporting the new valuation framework
In a downside case, where growth slows and margins remain pressured, the price target could fall as low as $7.