Looking to ride the wave of excitement surrounding artificial intelligence (AI). Granted, some of the forceful movement in AI stock may be due to short covering. Yet, long-term investors should focus on C3.ai’s financial progress, which has been impressive.)? Now’s a great time to consider a share position in machine-learning software specialist C3.ai (NYSE:
Sure, there are other ways to get some exposure to the machine-learning market over the coming years. For example, Alphabet (NASDAQ:GOOG, NASDAQ:GOOGL) and Microsoft (NASDAQ:MSFT) have business interests in the AI space.
However, C3.ai literally has AI in the company’s name and provides investors with pure-play exposure to machine learning. So, if you’re ready to take the most direct route to an AI investment, let’s take a closer look at what makes C3.ai a high-conviction multi-year pick.
Strong Results, and Possibly Short Covering, Moved AI Stock
Quarter after quarter, C3.ai has consistently exceeded Wall Street’s earnings per share ( ) expectations. Due to this excellent track record, C3.ai was under pressure to deliver another round of outstanding quarterly results.
Fortunately, C3.ai managed to beat the Street once again with outstanding results for fiscal 2023’s third quarter. AI stock rallied 33% on the heels of C3.ai’s earnings report. Some of that share-price move may have been due to short sellers covering their positions, though.
“We attribute some of the stock’s share-price strength … to short covering (with 25% short interest),” Needham analyst Mike Cikos explained. “Furthermore, the stock’s year-to-date performance demonstrates Generative AI fervor and C3 getting caught up as a meme stock,” Cikos added.
He’s probably right about that. Still, C3.ai’s results indicate that AI stock’s rally wasn’t only prompted by short covering. Analysts expected the company to lose 22 cents per share on an adjusted, non-GAAP-measured basis, but C3.ai only lost 6 cents per share.
C3.ai Aims to Achieve Profitability in 2024
Plus, there’s more positive news to report. C3.ai had previously guided for a quarterly revenue range of $63 million to $65 million but ended up delivering $66.7 million. Moreover, this result beat the analyst consensus estimate of $64.3 million.
In addition, Piper Sandler analyst Arvind Ramnani felt that C3.ai’s “progress towards profitability was impressive.” C3.ai’s aforementioned non-GAAP adjusted per-share loss of 6 cents did, indeed, show improvement over the year-earlier quarter’s loss of 7 cents per share.
Perhaps most importantly, C3.ai CEO Thomas Siebel assured that his company is “on track to become cash positive and non-GAAP profitable by the end of” fiscal 2024. If C3.ai achieves this goal, it’s hard to imagine that AI stock won’t gain considerable value in fiscal 2024 and beyond.
So, Where Will AI Stock Be in 5 Years?
Short covering and meme-stock fervor may have helped C3.ai’s investors book quick returns. On a multi-year basis, however, sustainable growth will depend on C3.ai’s ability to continue delivering outstanding results.
C3.ai has demonstrated its ability to surpass Wall Street’s estimates. Additionally, the company could become profitable sooner than some people expect it to.
Therefore, if you’re bullish on machine learning generally, and C3.ai’s future prospects in particular, consider a long position in AI stock. Set a five-year target of $100, which is entirely reasonable as C3.ai is making notable financial progress within the fast-emerging machine-learning industry.
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.