On Monday, Deutsche Bank (ETR:DBKGn) adjusted its price target for c3.ai (NYSE:AI), increasing it to $22.00 from the previous $18.00, while continuing to recommend a Sell rating for the stock. The decision follows c3.ai's recent financial results, which were largely in line with expectations and resulted in the company's shares rising by more than 20%.
The third fiscal quarter (F3Q) revenue for c3.ai was reported at $78 million, which is roughly 3% above the guidance midpoint and represents an 18% year-over-year increase. This performance is compared to a weaker period in the previous year.
The forecast for the fourth fiscal quarter (F4Q) revenue stands at $84 million, aligning with consensus but slightly below the previously implied level. Consequently, the full-year 2024 guidance experienced a minor $0.5 million increase.
c3.ai's non-GAAP operating losses were less than anticipated at -$26 million. However, these losses are expected to grow in the F4Q, ranging from -$44 million to -$52 million, as opposed to the prior guidance midpoint of -$36 million.
Despite the wider projected losses, the company has shown positive developments, particularly in its Federal vertical, where revenue and bookings significantly increased by more than 100% and 85% year-over-year, respectively.
The company also saw early success in the State and Local Government sector, which accounted for 29% of its bookings, starting in its home region of the Bay Area. Additionally, there was a noticeable increase in business through its partner network, with bookings growing 62% quarter-over-quarter. Customer engagement also improved, with an 80% year-over-year increase according to c3.ai's metrics.
While acknowledging the potential opportunities presented by the emergence of Generation AI for c3.ai, Deutsche Bank expressed continued skepticism. The firm questioned the distinctiveness of c3.ai's platform, the sustainability of any competitive advantage gained from its ability to incorporate GenAI into its model-driven architecture, and its potential to meet evolving financial targets.
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