Sign InC3.ai Stock Faces Volatility and Regulatory Worries, Hold Recommendation
Summary
C3.ai, Inc. (AI) experienced a 6.10% decrease in stock price due to regulatory concerns, but technical indicators show a bullish trend and valuation suggests it may be undervalued, leading to a recommendation to Hold the stock and monitor the situation. (Analysis date: July 14, 2023)
Fundamental Analysis
C3.ai, Inc. (ticker: AI), a NYSE-listed firm, has a market capitalisation of $4.30 billion and 115.61 million stocks in circulation. As of the most recent close on July 14, 2023, the stock was trading at $37.23, which was a 6.10% or $2.42 fall from the previous day.
From a historical perspective, AI had a 52-week high price of $48.87 adjusted and a low point of $10.16. The range indicates considerable volatility over the year, with the stock currently trading closer to its yearly high. Taking a shorter-term perspective, the daily price moved between a low and high of $37.13 and $40.29, respectively.
Regarding recent news influencing the stock's performance, the report about the Federal Trade Commission investigating ChatGPT and its owner, OpenAI on July 14, 2023, could have contributed to the recent decrease in stock price due to regulatory worries. Thus, keeping a close eye on the outcome of this investigation may be crucial for future price movement.
C3.ai reported a negative earnings per share (EPS) of $-2.38, with a negative price-to-earnings (P/E) ratio of -15.64. Typically, a negative P/E can indicate the company isn't profitable or its earnings and other financial indicators are significantly volatile.
Technical Analysis
The current market downturn is evident in the share's MACD, which stands at -0.739231. Typically, a negative value implies bearish sentiment.
Moreover, the stock is currently trading above its 50-day ($32.67) and 200-day ($20.93) moving averages, commonly used indicators of price trend and strength. Being above both averages indicates a bullish trend from a technical stance.
AI's 14-day Relative Strength Index (RSI) is at 61. It's generally believed that an RSI of over 70 suggests an overbought market position, while a figure below 30 indicates an oversold condition. With its current RSI, AI is approaching possibly overbought territory.
Outlook and Valuation
Given the discounted cash flow (DCF) analysis, the intrinsic value of the stock stands at $39.82, suggesting it's currently undervalued compared to the last close price of $37.23.
However, the consensus target price, was lower at $22.01 - suggesting mixed sentiment from analysts - with a high target at $31 and a low target at $13.
Evaluation
Considering the significant stock volatility, regulatory uncertainties, and the negative EPS and P/E ratio, the current outlook for C3.ai is complicated. However, its technical indicators show a bullish trend and the DCF suggests potential undervaluation.
The stock would then be categorized as a Hold. Investors should monitor the situation, reevaluate their positions depending on sector-wide changes, and changes specific to C3.ai, including the outcome of the FTC investigation.
