JPMorgan Downgrades C3.ai: AI Stock Faces Valuation Concerns Amid Growth Challenges

JPMorgan downgrades C3.ai, says artificial intelligence play is too expensive

C3.ai 's current trading price looks lofty compared to its growth potential, according to JPMorgan. The firm downgraded shares of the enterprise artificial intelligence software company to an underweight rating from neutral. JPMorgan left its $28 price target unchanged, implying that the stock could tumble 33% from its Tuesday closing price. Shares of C3.ai have soared 45% in 2024. Analyst Pinjalim Bora said that the downgrade was largely based on the stock's valuation, which he now considers to be stretched. AI YTD mountain C3.ai YTD graph "Given the already rich valuation, which is likely already pricing in a much better growth-plus-profile, which we find difficult to underwrite currently, we expect shares to underperform our coverage for 2025," the analyst wrote. "While we understand that C3.ai is going after a massive and rapidly evolving opportunity around Artificial Intelligence, we think its uneven and subpar growth-plus-margin performance leaves a lot to be desired, and it remains a big outlier compared to a broader base of peers trading at over 10x FTM revenue." While Bora commended the company for improving its revenue growth as of late, the analyst added that this growth has come at high incremental costs and looks more impressive considering the firm's muted growth in year-ago quarters. Bora also pointed out that C3 is much smaller in scale, but still growing at the same rate as peers that are five times larger.

Why C3.ai Stock Is Plummeting Today | The Motley Fool

C3.ai is falling today after JPMorgan published bearish coverage on the stock. The firm's analysts downgraded their rating on C3.ai stock and maintained a one-year price target of $28 per share. As of this writing, the analyst's target still implies additional downside risk of 27%. JPMorgan released its latest coverage on C3.ai stock before the market opened this morning, and investors are reacting to concerns raised in its coverage note. While the firm's analysts acknowledged that the company was chasing after large and rapidly shifting opportunities in the artificial intelligence (AI) space, they expressed disappointment with its sales growth and margin. JPMorgan's analysts acknowledged that C3.ai's revenue growth has been accelerating, but they pointed to the rising costs needed to propel that sales growth as a sign that the business is not seeing sufficient profitability improvements as it scales up. While the firm's analysts maintained its one-year price target of $28 per share on the stock, C3.ai's share price has risen a lot since the firm last issued coverage on the stock. Even with a big pullback today, the stock is still up roughly 33% across this year's trading. While JPMorgan's bearish note on C3.ai is the coverage moving the market today, another team of analysts had a more favorable outlook on the stock. Before the market opened today, Canaccord published a note raising its one-year price target to $40 per share and maintaining a hold rating on the stock. The analysts praised C3.ai's recently released results for the second quarter of its current fiscal year and saw the company's sales growth and margin improvements as positive indicators, but valuation still appears to be a concern. Canaccord's new price target is roughly 5% higher than C3.ai's current trading price, but it's also roughly 4% lower than yesterday's market close. With the software and consulting specialist trying to solidify early foundations in the rapidly shifting AI space, C3.ai is a difficult stock to value right now. While it's possible that shares could post explosive growth from current pricing levels, the speculative nature of the company's growth trajectory means the stock is also relatively high risk.