- Needham analyst Mike Cikos downgraded C3.ai, Inc (NYSE:AI) to Hold from Buy and removed his last $20 price target.
- C3.AI announced a shift toward a Consumption model alongside its earnings. Management expects to weigh on near-term revenue before achieving escape velocity as more customers are onboarded and the usage-based flywheel takes hold.
- Cikos called the company’s shift toward a consumption model announced alongside its earnings report “necessary but time-consuming” as C3’s “elephant-hunting” for up to $50 million deals falls flat in the macro environment.
- Still, a pivot in monetization is “challenging, time-consuming and requires a re-think throughout the entire organization,” contends Cikos.
- Revenue is depressed near-term as new customers are onboarded, and it typically takes 3-4 quarters to ramp consumption levels, he noted.
- Meanwhile, profitability suffers as the operating expenditure base builds customer success initiatives.
- The net impact is a dim view of how C3 AI emerges from the transition, allowing confusion in the market concerning what denominator investors should use for their EV/Sales calculation and what multiple to assign. At the same time, he awaits more evidence of C3’s durable growth post-transition, Cikos added.
- Price Action: AI shares traded higher by 0.24% at $14.49 on the last check Friday.
Louisiana-Pacific Q3 Results Exceed Street Expectation; CEO Says ‘We Believe Siding Inventories Have Normalized’
Louisiana-Pacific Corp (NYSE: LPX) reported
