C3.ai (NYSE:AI) Shares are falling in Wednesday trading. The company’s stock price fell 8.1% as of 11 a.m. ET. Meanwhile, the S&P500 index rose 0.6%, and the Nasdaq Composite index rose by 1.2%.
C3.ai is falling today after JPMorgan published bearish coverage on the stock. The company’s analysts lowered their rating on C3.ai stock and maintained a one-year price target of $28 per share. At the time of writing, the analyst’s target still implies an additional 27% downside risk.
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JPMorgan published its latest coverage of C3.ai stock before the market opened this morning, and investors are reacting to the concerns raised in the coverage note. While the company’s analysts acknowledged that the company was pursuing large and fast-moving opportunities in artificial intelligence (AI), they expressed disappointment with its revenue growth and margins.
JPMorgan’s analysts acknowledged that C3.ai’s revenue growth has accelerated, but they pointed to the rising costs needed to drive that revenue growth as a sign that the company isn’t seeing enough profitability improvements as it scales. While the company’s analysts maintained its one-year price target of $28 per share for the stock, C3.ai’s share price has risen sharply since the company last reported on the stock. Even with a big pullback today, the stock is still up about 33% in trading this year.
While JPMorgan’s bearish comment on C3.ai is the news moving the market today, another team of analysts had a more favorable view on the stock. Before the market opened today, Canaccord published a note raising its one-year price target to $40 per share while maintaining a hold rating on the stock.
The analysts praised C3.ai’s recently released results for the second quarter of the current fiscal year and saw the company’s revenue growth and margin improvements as positive indicators, but its valuation still appears to be a concern. Canaccord’s new price target is about 5% higher than C3.ai’s current trading price, but also about 4% lower than yesterday’s market close.
As the software and consulting specialist looks to solidify early foundations in the rapidly changing AI space, C3.ai is a tough stock to value at the moment. While it’s possible that shares could show explosive growth from current price levels, the speculative nature of the company’s growth trajectory means that the shares also carry relatively high risk.
