When a stock finally rallies after a harsh pullback, that can lure some investors. But it is better to put the action in context. Is the rally helping the stock build a proper base with a buy point? Or has the stock's rank among others improved? C3.ai is rallying after selling off on first-quarter results in September. But is C3.ai stock a buy now?
First-quarter sales grew 21% to $87.2 million, above analyst estimates for $86.9 million, and well ahead of the company's own prediction for $82.5 million at the midpoint. C3.ai reported a loss of 5 cents per share, better than views for a 13-cent loss. Still, shares plunged 8% on Sept. 5.
But the October rally has helped the stock clear its 50-day and 200 day moving averages. However, IBD MarketSurge shows that stock has not been able to sustain its rallies and has undercut several bases since February 2023.
Weakening Relative Strength For C3.ai Stock
C3.ai stock has a Relative Strength Rating of 44, a sharp drop from 96 a year ago. Investor's Business Daily recommends focusing on stocks with an RS Rating of 80 or above. Its chart is also bearish, with the 200-day moving average above the 50-day line.
The stock has been underperforming the S&P 500 as well.
In January, the S&P 500 rose 1.6% while C3.ai fell 14%. In February, the stock catapulted 50% on fiscal third-quarter results and bullish guidance, while the S&P 500 gained 5%. But most of its gains evaporated in March as the stock fell 27% vs. the S&P 500's gain of 3%.
It underperformed the index again in April. Fourth-quarter results helped the stock outperform the benchmark index in May as it gained 31% vs. the index's 4.8% rise. In June and July, the stock fell 2% and 7.6% while the S&P 500 gained 3.5% and 1.1%. In August the index gained 2.3% with C3.ai stock falling 12.8%.
Its 4% gain in September was twice that of the S&P 500, while in October shares were 14% higher as of Monday while the index had gained 2%.
The stock is also prone to drastic swings. On Nov. 20, 2023, C3.ai stock jumped more than 5% but reversed lower to close with a 4.3% loss when Sam Altman was ousted as chief executive from another artificial intelligence specialist, OpenAI. Altman quickly returned to OpenAI, but the news apparently triggered speculative trading as the market continued to search for leaders in the space.
Shift In Pricing Model
However, industry trends have worked in its favor as well. C3.ai stock skyrocketed Feb. 1, when users successfully tapped OpenAI's ChatGPT artificial intelligence app to generate answers, texts, emails and even write books.
The ChatGPT app reached 100 million monthly active users in two months, beating popular apps like TikTok and Instagram. OpenAI's partnership with Microsoft's ChatGPT uses natural language to help users write emails, write code and find answers to daily questions.
There are other considerations. In December 2022, C3.ai changed its pricing model from subscription to consumption-based pricing.
The move brought the company in line with industry standards for software-as-a-service providers. The practice is common across Amazon.com's Amazon Web Services, Alphabet's Google Cloud and Microsoft's Azure, as well as smaller players.
Consumption pricing works like a utility bill. That is, the higher the consumption, the pricier the service. Since AI customers will benefit from having access to an AI enterprise platform with unlimited use and developer licenses, the switch to consumption pricing could drive revenue growth, but not immediately.
C3.ai CEO Thomas Siebel has indicated the consumption-pricing model will also lower barriers to entry because companies do not have to be tied to long contracts.
Artificial Intelligence News And AI Stocks To Watch
Is C3.ai Stock A Buy Now?
Redwood City, Calif.-based C3.ai makes software applications equipped with artificial intelligence that can be configured for different purposes.
The software can make networks more reliable by detecting fraud, balancing inventory and demand, solving supply-chain issues and increasing energy efficiency. It can also help defend against money laundering.
The enterprise software stock popped on its first day of trading on Dec. 9, 2020. Shares leapt from an IPO price of 42 to finish at 92.49 that day.
C3.ai stock has some work to do to improve its Composite Rating, which stands at 48 out of 99. The EPS Rating lags even more, at 40, while a proper base in not clear yet. The stock is not a buy now.
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