Share prices of C3.ai(NYSE: AI) were surging after the company's quarterly business update on Wednesday. The report highlighted the booming demand for enterprise artificial intelligence (AI) software. The company's revenue beat the Wall Street consensus estimate, and one firm sees more upside for the stock.
Wedbush Securities analysts kept an outperforming rating on the stock and raised their price target from $35 to $40, representing about 10% upside from the current share price. The price target by itself shouldn't matter to an investor who is looking for much bigger gains over the long term. In this case, Wedbush noted the quarter validated its confidence in the growth story, which is an important signpost for any investor.
Why C3.ai stock is up
C3.ai reported a revenue increase of 18% year over year, a slight acceleration over the 17% increase in the previous quarter. On the earnings call, C3.ai CEO Thomas Siebel emphasized that data centers are investing in AI for more than consumer applications, stating, "The market interest in enterprise AI is staggering."
The strong demand explains Wedbush's confidence in the growth story that could benefit the stock in the near term. The company signed several new agreements with major companies, including T-Mobile and Boston Scientific, and continued to see strong growth from the U.S. government.
The negative with C3.ai is that it continues to report large losses on the bottom line, but the company's profitability should improve as the business continues to grow. The company noted a 73% year-over-year increase in the customer pipeline.
Management is calling for full-year fiscal 2024 revenue to increase approximately 15% over fiscal 2023, while it expects free cash flow to turn positive in fiscal 2025.
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John Ballard has positions in C3.ai. The Motley Fool recommends C3.ai and T-Mobile US. The Motley Fool has a disclosure policy.
