Should You Buy C3.ai Stock Before Dec. 9?

Is C3.ai Stock a Smart Buy Before Dec. 9? Here’s What You Need to Know

Artificial intelligence (AI) is one of the hottest topics in the tech world, and companies like C3.ai are riding the wave of excitement. Known for its focus on providing turnkey AI solutions to businesses, C3.ai aims to simplify AI adoption for companies eager to embrace next-generation technologies. But with its next quarterly earnings report set to release on Dec. 9, investors are asking a critical question: Should they buy C3.ai stock now or wait?

While timing a stock purchase around a single event isn’t typically a priority for long-term investors, quarterly earnings reports can have a significant impact on stock prices. For those looking to maximize returns, buying at a discount can be appealing. However, the decision to invest in C3.ai goes beyond timing—it’s about understanding the company’s growth trajectory, profitability, and risks.

C3.ai’s Revenue Growth Is Picking Up Speed

It’s been a rollercoaster ride for C3.ai over the past few years. After experiencing a sharp slowdown in 2022, the company found new momentum late that year, thanks in part to the buzz surrounding OpenAI’s groundbreaking ChatGPT generative AI chatbot. The excitement around ChatGPT and AI in general has reignited C3.ai’s growth, with the company now achieving year-over-year revenue increases exceeding 20%.

For the recently completed quarter, C3.ai has projected revenue between $88.6 million and $93.6 million. At the midpoint of this range, the company would achieve a growth rate of approximately 24%, signaling further acceleration in its top-line performance. This growth is crucial not only for attracting investors but also for moving closer to profitability—a goal that CEO Thomas Siebel has described as a “mathematical certainty” as the company scales its operations.

Profitability Remains a Sticking Point

Despite its impressive revenue growth, C3.ai faces a significant challenge: achieving sustainable profitability. While the company has made strides in reducing its losses, it still has a long way to go before reaching breakeven. This is a critical issue for investors, as profitability often separates the winners from the losers in the competitive AI sector.

Take, for example, Nvidia, a top AI stock that has delivered not only massive revenue growth but also soaring earnings. C3.ai, on the other hand, has yet to demonstrate similar progress on its bottom line. This lack of profitability is likely a key factor keeping the stock from gaining more traction in the market.

AI Net Income (Quarterly) data by YCharts

For C3.ai to win over skeptics—and there are many, as evidenced by a short interest of over 23%—it must show significant progress in earnings. Without this, the stock could face a sell-off, especially if the company’s growth slows or if economic conditions lead businesses to cut back on AI-related spending.

Why C3.ai Is a Risky Bet Right Now

Investing in C3.ai comes with considerable risks. If the company’s growth slows in the upcoming quarter and its earnings fail to improve meaningfully, investors could lose confidence and sell off their shares. This is particularly concerning given the current economic climate, where businesses may scale back on discretionary spending, including AI investments.

Here are three key risks to consider before investing in C3.ai:

1. Profitability Concerns: The company has yet to achieve sustainable earnings, which could deter long-term investors.
2. Economic Uncertainty: A potential economic slowdown could lead to reduced spending on AI solutions, impacting C3.ai’s growth.
3. High Short Interest: With short interest exceeding 23%, there’s significant bearish sentiment surrounding the stock.

While the stock has performed well this year, gaining 35% as of Monday, these risks make it a less-than-ideal choice for cautious investors. Waiting on the sidelines until after the Dec. 9 earnings report—or even longer—might be the safer approach.

The Bottom Line

C3.ai is undoubtedly a company with potential, thanks to its focus on AI and its recent revenue growth. However, the lack of profitability and the risks associated with economic uncertainty make it a risky investment at this time. For those considering buying the stock, patience may be the best strategy. Waiting to see how the company performs in its upcoming earnings report could provide valuable insights into its long-term viability.

In the world of AI stocks, growth is only part of the equation. Profitability and sustainability are equally important, and C3.ai has yet to prove itself on these fronts. As the Dec. 9 earnings report approaches, all eyes will be on whether the company can deliver the results needed to justify its current valuation—and whether it can convince investors that it’s a stock worth holding for the long haul.