Enterprise artificial intelligence application software company C3.AI (NYSE: AI) stock has been crushed (-42%) for the year. The artificial intelligence (AI) software company was created by former Oracle executive and founder of Seibel Systems Tom Seibel. The platform enables clients to develop and deploy enterprise AI applications. AI is considered the next secular growth opportunity, shifting systems from a history of descriptive (hindsight 20/20 reporting and analysis tools) to predictive. C3.ai is in the core of it. The Company grew revenues 38%, and its remaining performance obligations (RPO) grew 62% to $477.4 million. The RPO is how many future revenues remain to be collected on existing contracts that are not yet invoiced and the sum of the invoiced amounts. The Company signed a five-year $500 million transaction agreement with the U.S. Department of Defense and received the first two orders. Its oil and gas clientele has grown 116%. The Company also closed a $250 million contract with Microsoft (NASDAQ: MSFT) and continues to strengthen its collaboration with Google Cloud (NASDAQ: GOOGL). Despite lowering its revenue guidance, C3.ai has nearly $1 billion in cash and cash reserves. AI has taken software from providing history information to providing predictive knowledge that enables Companies to take pre-emptive actions to sidestep problems and grow efficiency and productivity. Prudent investors seeking exposure in the enterprise AI space can look for opportunistic pullback levels in shares of C3.ai.
Fiscal Q4 2022 Earnings Release
On Sept. 1, 2021, C3.ai released its fiscal fourth-quarter 2022 results for the quarter ended April 2022. The Company reported GAAP earnings-per-share (EPS) loss of (-$0.21) versus a loss of (-$0.29) consensus analyst estimates, an $0.08 beat. Revenues grew 38.3% year-over-year (YoY) to $72.32 million, beating analyst estimates for $71.28 million. Subscription revenues grew 31%. RPO grew 62% to $477.4 million, up from $293.8 million a year ago. The Company ended the quarter with $992.2million in cash and cash equivalents. C3.ai CEO Tom Siebel commented, “Our fourth quarter results showed continued strength across the business and came in ahead of expectations, with revenue growing 38% year over year. Our full fiscal year was equally strong. Revenue increased 38% to $252.8 million compared with fiscal 2021. Importantly, we continued to diversify our customer base throughout the fiscal year, with notable expansion in defense, intelligence, utilities, agriculture, chemicals, aerospace, and manufacturing. Our strong fiscal 2022 performance further strengthens our position as a global leader in the Enterprise AI market and sets the stage for growth in fiscal 2023.”
Downside Guidance
C3.ai provided fiscal Q1 2022 revenue guidance in line, coming in between $65 million to $67 million versus $71.62 million consensus analyst estimates. The Company sees fiscal full-year 2022 revenues between $308 million to $316 million versus $333.93 million.
Conference Call Takeaways
CEO Siebel stated that the enterprise AI market is predicted to grow to nearly $600 billion by 2025. Its C3.ai Suite is the platform that has been over a decade in the making that enables clients to design, develop, provision, and operate in the most complex enterprise applications. He took some time explaining how C3.ai differentiates itself from the rest of the AI market. The Company has developed and delivered 42 turnkey enterprise AI applications to accommodate the needs to multiple industries, including manufacturing, oil and gas, chemicals, aerospace, and governments. He spoke about the growth of enterprise applications software that was built on top of relational database systems like Oracle (NASDAQ: ORCL) and tools that could provide accurate reports (IE: inventory, supply chain, balances, customer churn rate). These are descriptive systems that report details as needed in perfect 20/20 hindsight. C3.ai adds an AI application layer that makes them predictive. For example, a descriptive system that reports how many parts have historically been in inventory now can tell exactly how many parts will be needed in each big to meet the demand function for the next 180 days. Rather than report the historical number of fraudulent events in the past, it identifies real-time fraudulent events and helps prevent them in the future. Rather than a company knowing its historical customer churn, they can anticipate which customers are going to leave if it doesn’t take action, predictive. Not only knowing what machines are going to fail in the future so they can fix them before it happens results in lower failure rates and higher productivity. The Company has been capturing customers at an 80% clip, with the highest in Oil and Gas, up 116%. Shell has standardized C3.ai across all lines of business, monitoring over 10,000 pieces of equipment.
AI Opportunistic Pullback Levels
Using the rifle charts on the weekly and daily time frames provides a precise view of the landscape for AI stock. The weekly rifle chart bottomed at the $13.37 Fibonacci (fib) level. The weekly rifle chart breakout triggered on the stochastic mini pup through the 50-band. The weekly 5-period moving average (MA) is rising at $19.16, and 15-period MA at $18.45. The weekly upper Bollinger Bands (BBs) at $23.75 and weekly lower BBs sit at $14.51. The weekly market structure low (MSL) buy triggers above $18.80. The daily rifle chart made a sharp reversal on the uptrend causing the 5-period MA to flatten at $19.91 and 15-period MA at $19.53. The daily 50-period MA sits at $18.37. The daily upper BBs sits at $21.48, and lower BBs at $17.08. Daily 200-period MA at $26.92. Prudent investors can monitor for opportunistic pullback levels at the $17.73 fib, $16.59 fib, $15.71, $15.07, $14.40, $13.37 fib, $12.48, and the $11.75 fib level. Upside trajectories range from the $23.42 fib level up towards the $32.51 fib level.
