1. C3.ai
Shares of C3.ai have plunged 25% thus far in 2024. This comes after a much stronger rally in 2023, when the stock surged 157% amid the hype in AI.
C3.ai just hasn’t been generating the types of growth investors may have expected from an AI stock. While chipmaker Nvidia has been tripling its sales numbers, C3.ai’s revenue grew by a much more modest rate of 18% last quarter, for the period ending Jan. 31. And revenue of $78.4 million for the period was up just 7% on a quarter-over-quarter basis from the previous period.
The company, however, remains optimistic. C3.ai provides businesses with AI services to help them improve their throughput and efficiency. In its latest earnings release, the company highlighted a 71% increase in the number of new pilots launched (29) compared to the previous year. And the number of agreements it closed (50) was also 85% higher than a year ago.
If all those deals and pilots pay off, there could be a big payoff for the stock. According to Wall Street’s consensus analyst price target of just under $30, shares of C3.ai could rise by around 40% from where they are right now.
Investors, however, would need a reason to rally, and a much higher revenue growth rate could do that. And given its uninspiring results thus far and the company’s continued lack of profitability, C3.ai isn’t a stock I’d take a chance on today. While the opportunities sound good, investors may be better off waiting to see that the results are there to actually back up the hype and excitement.
2. BigBear.ai
Like C3.ai, BigBear.ai had a big year in 2023, as its shares rose by 218%. This year, it also has given back some of those gains as BigBear.ai’s stock has performed slightly worse, falling by around 26%. The upside, however, is far higher according to analysts. The consensus analyst price target for BigBear.ai is $3, which is near double where the stock trades at today.
BigBear.ai’s aim is to focus on multiple opportunities in AI, including supply chain management, national security, and digital identity. The company recently bolstered those growth prospects with the acquisition of Pangiam Intermediate Holdings, a leading company in vision AI. Its products and services can help scan and identify individuals.
The problem with BigBear.ai, however, is also a lack of growth. For all the exciting prospects it appears to have on the horizon, the results simply haven’t been there to imply a near-term opportunity is at hand.
For the last three months of 2023, the company’s revenue totaled $40.6 million and was largely unchanged from the $40.4 million BigBear.ai reported in the prior-year period. Its net loss of $21.3 million did, however, shrink from the $29.9 million loss it reported a year earlier.
When including the results of Pangiam, BigBear.ai projects its revenue will come in within $195 million and $215 million this year, which would represent an increase of 32% at the midpoint. If the company can come through on that growth while also improving its bottom line even further, that could give investors a reason to be more bullish on BigBear.ai’s stock. Investors, however, may want to wait until the company releases earnings in early May to get an early idea of how it is progressing. This is a risky stock to own, given its lack of profitability and minimal growth.
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