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Is C3.ai The 'LeBron' Of Artificial Intelligence? 4 Analyst Takes On Recent IPO

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Is C3.ai The 'LeBron' Of Artificial Intelligence? 4 Analyst Takes On Recent IPO

One of the best-performing IPOs of 2020 was SaaS company C3.ai Inc (NASDAQ: AI). The stock priced at $42, above its initial range of $30 to $33, and closed at $161 in their first week of trading. 

Growth Ahead: C3.ai is called a disruptive enterprise software vendor by Wedbush analyst Daniel Ives.

It's "the LeBron of AI setting up for massive growth," said Ives, who initiated the company with an Outperform rating and $200 price target.

C3.ai has a subscription model that could drive 30% revenue growth annually and strong gross margins, said KeyBanc analyst Michael Turits.

The analyst has a Sector Weight rating on shares of C3.ai based on valuation.

"AI is the new internet for the enterprises," said Piper Sandler analyst Arvind Ramnani, who rates the stock Overweight with a $166 price target.

Ramnani said the company's revenue and gross margins are supported by strong gross retention and partnerships that will drive sales.

Related Link: IPO Outlook For The Week: Airbnb, DoorDash Lead Highly Anticipated Week

Partnerships: The company's partnerships with Microsoft Corporation (NASDAQ: MSFT) and Baker Hughes (NASDAQ: BKR) are a positive for Ives. 

Turits mentioned a partnership with Baker Hughes and said it has a minimum value of $450 million for a five-year contract. Raytheon (NYSE: RTX) and Adobe (NYSE: ADBE) are were also mentioned.

"C3 has established lighthouse go-to-market and development partnerships with leaders in industries like energy (Baker Hughes), defense (Raytheon), financial services (FIS) and horizontal partnerships like CRM (Microsoft/Adobe)," the analyst said.

Analysts On C3.ai's Valuation: Wedbush Ives' price target comes from a valuation of 27x EV/revenue for fiscal year 2026.

Turits is cautious on C3.ai shares due to valuation. The analyst said three customers equal 44% of the company's revenue and has a relatively small number of customers.

"Despite its large, dynamic market opportunity, we view AI as fully valued at 82.2x EV/revenue (CY21E)," he said. 

C3.ai is valued at 35x 2023 estimated revenue of $325 million by Ramnani.

Morgan Stanley analyst Sanjit Singh initiated shares with an Underweight rating and $100 price target. The analyst said there is "compelling growth ahead," but success is priced in.

AI Price Action: Shares of C3.ai were trading down 13.65% at $120.11 at last check Monday.

Latest Ratings for AI

DateFirmActionFromTo
Jan 2021Piper SandlerInitiates Coverage OnOverweight
Jan 2021Morgan StanleyInitiates Coverage OnUnderweight
Jan 2021Canaccord GenuityInitiates Coverage OnHold

View More Analyst Ratings for AI
View the Latest Analyst Ratings

 

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