C3.ai (AI) rose after the company responded to an allegation that the enterprise software play had “serious accounting and disclosure issues.” Shares had broken out of consolidation with a 31.02 entry last week but fell steeply by 26% on Tuesday and Wednesday.
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Earlier, short seller Kerrisdale Capital raised questions about AI stock’s unbilled receivables and margins from client Baker Hughes.
However, the company alleges unbilled receivables are consistent with the accounting practice of recognizing revenue in the current quarter, even if some revenue is booked in a later quarter. It also stated the reference to gross margins in the Baker Hughes contract isn’t supported by financial statements that do not provide “customer-specific” information.
Though shares have not undercut their base, the fall below the 50-day moving average is a sell signal and AI stock is testing key levels and is on watch.
Massive Artificial Intelligence Growth
C3.ai CEO Tom Siebel sees AI applications hitting $600 billion as everyone will eventually use enterprise AI.
That is far less than Cathie Wood’s prediction. In Ark Investment Management’s “Big Ideas 2023” report, Wood sees AI adding $200 trillion to the economy by 2030.
Generative AI will increase efficiency for professionals and AI stock has first-mover advantage, touting partnerships with Google parent Alphabet (GOOGL), Amazon (AMZN), Microsoft (MSFT), Accenture (ACN), Baker Hughes (BKR) and others.
AI Stock Earnings: Still In The Red
AI stock reported sales of $66.7 million in the last quarter, down 4% year over year from $69.8 million. However, it still beat guidance of $63-$65 million. AI posted a net loss per share of 6 cents, slightly better than the 7 cents per share loss last year.
CEO Thomas Siebel stated that “overall business sentiment appears to be improving” compared with mid-2022 and he sees the company becoming profitable in fiscal 2024.
The generative AI stock disclosed $789.8 million in cash to carry it through “equity market turbulence”. This should help “invest in growth through enterprise AI innovation and sales expansion.”
AI has also expanded ties with Amazon Web Services (AWS) for several industries, including local government offices.
AI Stock Surges On ChatGPT Success
The stock skyrocketed in February when users successfully tapped OpenAI’s ChatGPT artificial intelligence app to generate answers, texts, emails and even books. AI stock stands to benefit from applications like ChatGPT.
C3.ai provides enterprise AI, which comprises applications for businesses but not consumers. But the company stands to benefit from consumer apps like ChatGPT because the code can be integrated into the C3.ai platform.
The ChatGPT app reached 100 million monthly active users in two months, beating popular apps like TikTok and Instagram. OpenAI’s partnership with Microsoft (MSFT) ChatGPT uses natural language to helps users write emails, develop codes and finds answers for daily questions.
The Redwood City, Calif. based company makes AI-enabled software applications that can be configured for different purposes. The software can make networks more reliable, detecting fraud, balancing inventory and demand, solving supply chain issues and increasing energy efficiency. It can also help with anti-money laundering and customer interfacing.
Enterprise CRM systems that use automation to reduce costs and errors benefit from C3.ai products.
AI Stock IPO
AI stock popped on the first day of public listing in December 2020, opening at $42 per share.
The stock rose from 11.19 at the end of 2022 to 30.92 earlier this month, surging over 150% in less than two months. The Composite Rating of 71 falls below the desirable level of 90. The low 44 EPS Rating clearly weighs on the Composite Rating. However, the 98 Relative Strength Rating speaks for itself, highlighting outperformance compared with other stocks in the IBD database.
It has a mediocre “C-” Accumulation/Distribution Rating and mutual funds own only 34% of shares, according to IBD MarketSmith.
According to the CAN SLIM investment strategy, stocks with strong records of sales and earnings growth that offer clear buy points from bases are sound picks. AI stock has broken out of a base on the news. Its earnings remain on watch.
To find the best stocks check out IBD Stock Lists and IBD Data Tables.
Please follow VRamakrishnan on Twitter for more news on AI stock.
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Source: https://www.investors.com/research/ai-stock-gains-after-response-to-short-seller-is-ai-stock-a-buy/?src=A00220&yptr=yahoo