Why C3.ai Sank 14.9% Last Month
What happened
Shares of C3.ai (NYSE: AI) gained 26.2% in November, according to data from S&P Global Market Intelligence. The stock lost ground amid selling pressures for growth-dependent software stocks and the publication of a new short report.
Short-selling firm Spruce Point Capital published analysis on C3.ai on Feb. 16 indicating that it saw the artificial intelligence (AI) stock having significant downside. At the time of the report's publication, the short-seller said it saw C3.ai potentially falling "up to 40% to 50%," pointing to a price range between $12.85 and $15.40.
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So what
Against the backdrop of selling pressures impacting the broader market, the bearish write-up from Spruce Point Capital triggered significant bearish momentum for C3.ai stock. The report noted that the AI specialist's customer base is highly concentrated, with energy-technologies company Baker Hughes accounting for more than 30% of sales. Spruce Point also stated that C3.ai had demonstrated a pattern of exaggerating its "customers, technology-development cost, total-addressable-market size, pace-of-market growth, market share, alliances, and sales cycle to close deals."
Now what
C3.ai stock has continued to fall early in March's trading. The company's share price is down roughly 10.6% in the month so far.
C3.ai published its third-quarter results on March 2, delivering sales and earnings for the period that topped the market's expectations. Revenue grew 42% year over year to reach $69.8 million, and the business posted a non-GAAP (adjusted) loss per share of $0.07. Meanwhile, the average analyst estimate called for an adjusted per-share loss of $0.26 on revenue of $67.16 million.
The company also raised its full-year revenue guidance to $252 million, representing a 38% increase compared to its previous target. Despite the sales and earnings beats and full-year revenue guidance hike, C3.ai stock lost ground after an initial post-earnings pop as negative coverage from analysts rolled in. Deutsche Bank's Patrick Colville and Needham's Mike Cikos were among a group of analysts that significantly cut their one-year price targets on the stock, and the downward revisions have added to recent selling pressures impacting software stocks.
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Keith Noonan has no position in any of the stocks mentioned. The Motley Fool owns and recommends C3.ai, Inc. The Motley Fool has a disclosure policy.
