C3.ai (AI): Evaluating Valuation After Revenue Miss, CEO Transition, and Investor Lawsuit

If you’ve been watching C3.ai (AI) lately, this might feel like one of those pivotal moments when investors have to decide whether to double down or step back. The company just revealed quarterly revenue that fell short of expectations and, in a more personal twist, announced that CEO Thomas Siebel will step aside due to serious health issues. These surprises have shaken investor confidence and fueled both a steep stock drop and the filing of a class action lawsuit over how the company disclosed details around the CEO’s health and outlook.

Zooming out, this is not an isolated incident. C3.ai’s stock has slid 42% in the past month alone and is down nearly 28% year over year, reversing earlier momentum that was partly driven by new AI products and partnerships, such as the recent collaboration with Eletrobras. Leadership uncertainty combined with missed revenue has clearly shifted market expectations, even as the company points to a strong cash position and ongoing efforts to stabilize operations.

This leads to the big question: with the stock trading at a significant discount from earlier in the year, is the market overlooking long-term growth potential here, or is all the risk already reflected in the current price?

Most Popular Narrative: 19.5% Undervalued

According to community narrative, C3.ai is seen as trading below its fair value, with analysts projecting significant long-term upside driven by major strategic partnerships and emerging technology trends.

The expansion of strategic alliances with major partners like Microsoft Azure, AWS, and McKinsey QuantumBlack has significantly increased sales reach and shortened sales cycles. This is expected to accelerate revenue growth and enhance operational efficiency. The integration with global sales infrastructures of partners like Microsoft and AWS, as well as making these solutions orderable on major cloud platforms, is likely to lead to a substantial increase in subscription revenue and faster contract initiation.

What is behind this bullish outlook? The narrative points to ambitious growth targets powered by industry alliances and future earnings strength. Want to know which bold numbers are shaping this forecast? The underlying math could surprise you, especially if you are interested in the drivers behind the valuation gap experts see.

Result: Fair Value of $21.75 (UNDERVALUED)

Have a read of the narrative in full and understand what's behind the forecasts.

However, ongoing financial losses and potential setbacks in key partnerships could quickly undermine the optimism surrounding C3.ai’s long-term growth outlook.

Find out about the key risks to this C3.ai narrative.

Another View: SWS DCF Model Tells a Similar Story

To cross-check the upbeat picture from multiples, our DCF model also signals that the current share price is below estimated fair value. But every model has its trade-offs—could both be missing something key?

Look into how the SWS DCF model arrives at its fair value.

Simply Wall St performs a discounted cash flow (DCF) on every stock in the world every day (check out C3.ai for example). We show the entire calculation in full. You can track the result in your watchlist or portfolio and be alerted when this changes, or use our stock screener to discover undervalued stocks based on their cash flows. If you save a screener we even alert you when new companies match - so you never miss a potential opportunity.

Build Your Own C3.ai Narrative

If you see things differently or want to dig into the numbers on your own, you can shape your own narrative in just a few minutes, so why not do it your way?

A great starting point for your C3.ai research is our analysis highlighting 2 key rewards and 4 important warning signs that could impact your investment decision.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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