Are you a true contrarian? To test this out, take a look at enterprise artificial intelligence (AI) firm C3.ai AI>. You’ll see that AI stock is clearly unloved in the markets right now.
Your gut reaction to this is a good litmus test. Some folks will want to avoid the stock, while others will choose to seize the opportunity.
There’s no denying that machine learning has a future. Today’s businesses are leveraging the power of AI, and C3.ai is a leader in this lucrative niche market.
Hence, I believe that there’s a dip-buying opportunity here if you’re willing to keep an open mind. Now, let’s conduct a quick analysis to determine how far the share price has fallen.
A Closer Look at AI Stock
Back in December of 2020, C3.ai priced its initial public offering (IPO) at $42 per share.
But amazingly, AI stock opened for trading at $100 on Dec. 9 and even went as high as $115.
That wasn’t even the end of the rally. On Dec. 22, the C3.ai share price soared to a 52-week high of $183.90.
Unfortunately, the bulls capitulated in early 2021. A share-price slide commenced in February, with AI stock tumbling to the $50 level in May.
This was followed by a period of sideways price action, as the stock was still close to $50 in early August.
At the same time, C3.ai’s trailing 12-month earnings per share was -99 cents. That’s not horrendous for a $50 stock, though I’d certainly like to see the company push that number into positive territory.
I searched high and low for a valid reason to explain the rout in AI stock.
After all, there should be a good explanation when a stock goes from $183.90 to $50. The company must be in really bad trouble, right?
This doesn’t appear to be the case with C3.ai. There’s no terrible news to report.
On the fiscal front, the company’s most recently reported results were quite impressive.
For the fiscal fourth quarter, C3.ai reported $52.3 million in total revenues, an increase of 26% year-over-year, as well as $43.1 million in subscription revenues, up 17% year-over-year.
The company’s full-year results were also perfectly acceptable, with total revenues of $183.2 million marking a 17% year-over-year improvement.
Maybe the hype surrounding C3.ai’s initial public offering (IPO) was too frothy. So, the market had to let some of the air out of the balloon.
Yet, the beatdown in the share price seems overdone. Bear in mind that this is a company which has partnered with data-cloud industry giant Snowflake SNOW>.
The Snowflake partnership demonstrates that C3.ai is making its mark in the enterprise application software field.
At the same time, a collaboration with communications and technology service provider NCS shows that C3.ai is prepared to expand its presence in the Asia Pacific region.
Through this arrangement, NCS will develop and deploy enterprise AI applications created on the C3 AI Suite.
In doing so, NCS intends to “leverage its deep domain experience and technology expertise in serving governments and businesses” in Southeast Asia and Australia/New Zealand.
According to C3.ai, this agreement is actually the company’s first strategic partnership with a telecommunications group. Yet, it’s a major coup for C3.ai.
Gartner, in its 2021 Global CIO Agenda survey, concluded that Southeast Asia and Australia/New Zealand were among the world’s fastest-growing regions to apply digitalization to optimize enterprise processes.
Therefore, C3.ai’s partnership with NCS should position both companies for excellent growth opportunities.
The Bottom Line
It’s possible that post-IPO disappointment caused the AI stock price to decline.
Still, there’s nothing wrong with the company itself. C3.ai is on solid financial footing and is moving into fast-growing geographic regions.
So, don’t hesitate to buy some shares at the current, unreasonably low price.
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On the date of publication, David Moadel did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
AI shares were trading at $50.70 per share on Monday afternoon, up $1.87 (+3.83%). Year-to-date, AI has declined -63.46%, versus a 19.03% rise in the benchmark S&P 500 index during the same period.
About the Author: David Moadel
David Moadel has provided compelling content – and crossed the occasional line – on behalf of Crush the Street, Market Realist, TalkMarkets, Finom Group, Benzinga, and (of course) InvestorPlace.com. He also serves as the chief analyst and market researcher for Portfolio Wealth Global and hosts the popular financial YouTube channel Looking at the Markets. More…
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