Investing in penny stocks can be risky, as these are largely companies with unproven business models. However, due to their smaller size, quality penny stocks have the potential to deliver outsized gains to shareholders over time.
One such penny stock is CXApp (CXAI), which provides solutions for workplace experience. These solutions are used in workplace analytics, occupancy management, corporate communications, navigation, content delivery, and more.
Valued at $34.16 million by market cap, CXApp is a micro-cap penny stock, trading at $2.32 per share as of this writing. After its quarterly results, the penny stock surged over 84% in a single trading session on Aug. 13. Let’s see if this breakout penny stock is a good buy right now.
How Did CXApp Perform in Q2 of 2024?
In the June quarter, CXApp reported revenue of $1.76 million, down from $1.91 million last year. Its operating loss of $3.65 million was down from $3.68 million, while the net loss of $5.25 million was narrower than its year-ago loss of $14.7 million.
CXApp remains unprofitable, and continues to optimize its cost base as operating expenses fell by 15% year over year in Q2 of 2024.
Moreover, booking growth for CXApp was driven by renewals and expansion by four other customers in other verticals. The subscription-to-one-time revenue split was 85% for Q2, up from 79% last year. Its gross margin also improved from 75% to over 80% in the last 12 months, while the net retention rate stood at 105%, indicating that existing customers increased spending by 5% in the past year.
CXApp completed a major business transformation to an artificial intelligence (AI)-native SaaS (software-as-a-service) model, as it saw an increase of 78% in renewal and expansion bookings year over year. The company reported its largest expansion deal with a major customer in the financial sector that is scaling its footprint globally. CXApp emphasized that the customer’s annual recurring revenue more than doubled due to this expansion.
Khurram Sheikh, Chairman and CEO, stated, “Q2 was a great quarter in cementing our business model and demonstrating the execution of our ‘land and expand’ strategy. We continue to make great progress in shaping the future of work with our largest expansion deal this quarter. This large enterprise client is seeing high adoption of our platform in their pilot deployments at their headquarters in the U.S. and a second major site. We are solving real problems in the work environment for them, and they are now planning to scale up with our AI-native solutions across their enterprise footprint.”
A Partnership With Google
CXApp just announced a multi-year, multi-million-dollar strategic agreement with Google Cloud (GOOGL)(GOOG). According to the agreement, the two companies will deploy and deliver advanced AI infrastructure, security, and application products. Additionally, Google Cloud will co-invest with CXApp to deploy, monitor, and modernize the latter’s native AI platform.
The CXAI tech platform showcases the company’s shift towards an AI-centric approach to workplace innovation. It aims to integrate customer experience with AI and deliver solutions that transform the workspace.
What is the Target Price for CXApp Stock?
The single analyst tracking CXApp stock has a “strong buy” rating and a target price of $6, indicating an upside potential of almost 161% from current levels.
CXApp might seem like an enticing buy due to its partnership with one of the largest companies in the world. However, it still remains unprofitable, and I would like to see at least four quarters of revenue growth before making an investment decision.
On the date of publication, Aditya Raghunath did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
