JPMorgan Slashes C3.ai (AI) Price Target to $23 on Weak Subscription Growth

We recently published a list of 10 AI Stocks Gaining Wall Street’s Attention. In this article, we are going to take a look at where C3.ai, Inc. (NYSE:AI) stands against other AI stocks that are gaining Wall Street’s attention.

On May 29, JPMorgan lowered the firm’s price target on C3.ai, Inc. (NYSE:AI) to $23 from $27 and kept an “Underweight” rating on the shares. C3.ai, Inc. (NYSE:AI) is an enterprise artificial intelligence (AI) software company involved in building and operating enterprise-scale AI applications and accelerating digital transformation.

The price target revision follows C3.ai’s fiscal Q4 report, which demonstrated mixed results. While total revenue exceeded expectations, it also revealed a dependency on professional services for outperformance. Moreover, subscription revenue, which is a key growth metric for the company, fell short of the consensus estimate by 9%.

JPMorgan Slashes C3.ai (AI) Price Target to $23 on Weak Subscription Growth

A computer engineer debugging a complex AI application on a powerful workstation.

Elaborating on subscription revenue, the firm said that a portion of the revenue includes demo licenses, which are non-recurring and make up approximately 40% of the total subscription revenue. These licenses have led to all the sequential growth in subscription revenue. Had they been excluded, it would indicate a decline instead.

Meanwhile, Prioritized Engineering Services (PES) revenue exceeded expectations and played a main role in the professional services segment’s performance, which surpassed consensus estimates and helped compensate for the underwhelming subscription figures. Even though C3.ai reported better-than-expected profitability for the quarter, its operating margins remained deeply negative.

Overall, while Bora recognized C3.ai’s quest in Artificial Intelligence and its strategic partnerships, there have been concerns over the stock’s potential performance due to the lack of core subscription growth, the irregularity of professional services revenue, and the company’s weak profitability profile.

Overall, AI ranks 10th on our list of AI stocks that are gaining Wall Street’s attention. While we acknowledge the potential of AI as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and have limited downside risk. If you are looking for an AI stock that is more promising than AI and that has 100x upside potential, check out our report about this cheapest AI stock.

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Disclosure: None. This article is originally published at Insider Monkey.