While C3.ai, Inc. (NYSE:AI) might not have the largest market cap around , it saw significant share price movement during recent months on the NYSE, rising to highs of US$31.62 and falling to the lows of US$23.40. Some share price movements can give investors a better opportunity to enter into the stock, and potentially buy at a lower price. A question to answer is whether C3.ai's current trading price of US$24.95 reflective of the actual value of the mid-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let's take a look at C3.ai's outlook and value based on the most recent financial data to see if there are any catalysts for a price change.
What Is C3.ai Worth?
C3.ai appears to be overvalued by 29% at the moment, based on our discounted cash flow valuation. The stock is currently priced at US$24.95 on the market compared to our intrinsic value of $19.33. This means that the opportunity to buy C3.ai at a good price has disappeared! If you like the stock, you may want to keep an eye out for a potential price decline in the future. Since C3.ai's share price is quite volatile, this could mean it can sink lower (or rise even further) in the future, giving us another chance to invest. This is based on its high beta, which is a good indicator for how much the stock moves relative to the rest of the market.
What does the future of C3.ai look like?
Future outlook is an important aspect when you're looking at buying a stock, especially if you are an investor looking for growth in your portfolio. Although value investors would argue that it's the intrinsic value relative to the price that matter the most, a more compelling investment thesis would be high growth potential at a cheap price. Though in the case of C3.ai, it is expected to deliver a relatively unexciting earnings growth of 5.4%, which doesn't help build up its investment thesis. Growth doesn't appear to be a main reason for a buy decision for the company, at least in the near term.
What This Means For You
Are you a shareholder? It seems like the market has well and truly priced in AI's future outlook, with shares trading above its fair value. However, this brings up another question – is now the right time to sell? If you believe AI should trade below its current price, selling high and buying it back up again when its price falls towards its real value can be profitable. But before you make this decision, take a look at whether its fundamentals have changed.
Are you a potential investor? If you've been keeping an eye on AI for a while, now may not be the best time to enter into the stock. The price has surpassed its true value, which means there's no upside from mispricing. However, the positive outlook means it's worth diving deeper into other factors in order to take advantage of the next price drop.
With this in mind, we wouldn't consider investing in a stock unless we had a thorough understanding of the risks. You'd be interested to know, that we found 2 warning signs for C3.ai and you'll want to know about these.
If you are no longer interested in C3.ai, you can use our free platform to see our list of over 50 other stocks with a high growth potential.
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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.