As we see the S&P 500 index at all-time highs, it has become harder to find companies that still have great value.
If you do not already own them, it may feel like you have missed out on the high-growth tech stocks as they keep trending higher. But there is one tech company the market could be overlooking currently.
AI is a new industry, and C3.ai has created a whole market for itself. Known as the Enterprise AI, the company can create AI applications for any industry out there, and customers are rushing to it.
Wall Street analysts Wedbush Securities believes this stock could go up by over 95% from its current levels, and there are some key points in favor of this prediction.
The internet has altered how the world does business. It supports the smallest of stores to go to the furthest corners of the world, leading to easier success and growth. But the internet has caused some industries to get left behind, mostly the ones that are reliant on input from humans. Think of real estate brokering or any profession in the legal sector, for example.
AI is the next frontier, and while it is still new, it is already bringing in labor-intensive companies into the digital market. It aided in building companies such as Zillow Group (NASDAQ:Z), because without machine learning and AI it would not be able to track the whole property market across the United States in real-time, allowing it to buy homes directly from home sellers (removing agents from the equation).
But Zillow is a company with technology at its center. Other companies don’t have these resources or ability to build AI programs in-house. That is the gap that C3.ai fills, and currently, it’s the only player around.
Great financial performance
After listing in Dec. 2020, C3.ai’s stock increased to prices as much as $161, but it has steadily gone down to around $50. The company has not yet lived up to the huge expectations around its profits and revenue growth.
But it still have huge potential, and Wedbush’s recent $100 price target is supportive of that. Financial performance is getting better, and since it might take up to six months to produce an AI application into the market, revenue growth is lagging customer growth. C3.ai’s 98 customers in Q1 are 85% of the increases compared to the same time frame last year, which sets up a possible revenue surprise in the future.
The company’s 2022 revenue estimates seem to point to a growth acceleration to higher levels, which has already happened in Q1, and is expected to get better next quarter.
While the firm is not profitable yet, it has a gross margin over 75%, which allows the company to reinvest revenue into its business to push growth. When revenue growth goes up in the future, it can lower expenses and give earnings to investors. For now, it’s all about growing and growing fast.
Author: Steven Sinclaire