Science

Why the market is drastically underestimating AI stocks

With enterprise artificial intelligence software company C3.ai (NYSE: IA) adding impressive customers and growing revenue at a fairly rapid rate, I still believe the company can become the ‘Microsoft of. IA ‘. Just as Microsoft (NASDAQ: MSFT) developed tools that make it easier for companies to develop documents and perform complex calculations, C3.ai created products that make it easy for companies to take advantage of artificial intelligence for a variety of purposes. Therefore, the longer-term outlook for AI stocks remains optimistic.

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It is important to note that the company is partnering with partners who have made significant progress in their business and are expected to continue to do so in the future. Their reasonable valuation also makes the stocks attractive.

C3.ai attracts new customers and shows strong growth

For the second fiscal quarter, which ended on October 31, the number of clients served by C3.ai increased 63% to a staggering 104. The company added first-line clients in both the public and private sectors.

Its list of new corporate clients includes industrial giants Johnson Controls (NYSE: JCI) and CNH Industriel (NYSE: CNHI), energy giant Royal Dutch Shell (NYSE: RDS.A), insurance bouncer Liberté Mutuelle and “One of the 5 best companies in life sciences “. In the public sector, the company signed an agreement with the United States Space Force.

Additionally, several of C3.ai’s large existing customers have increased their use of the company’s technology. Companies in this category include energy multinational Enel, food and industry heavyweight Cargill, financial services giant FIS, the US Air Force, and the US Missile Defense Agency. .

For the quarter, C3.ai revenue increased 41% year-over-year to $ 58.3 million. Sales to the public sector were up 33% from a year earlier, and CEO Tom Siebel said on the company’s earnings call that he expected public sector sales to accelerate in the coming months, during the current quarter and the next.

Highly effective partners should benefit the AI ​​stock

C3.ai is partnering with not one, but two cloud giants: Microsoft Azure and Alphabet (NASDAQ: GOOG, NASDAQ: GOOGL) Google Cloud.

By partnering with Microsoft, C3.ai closed about $ 220 million in revenue as of Dec. 1, and the portfolio of companies included about 120 partnerships and $ 140 million in potential revenue, according to Siebel.

C3.ai started working with Google Cloud relatively recently, but as of December 1, the companies had already built a portfolio of $ 58 million in business, the CEO reported.

At the same time, C3.ai works with two important but very different players in the energy sector: Boulanger Hugues (NASDAQ: BKR) and Engie.

Baker Hughes, which supplies products for fossil fuel exploration and extraction, has formed a joint venture with C3.ai. The joint venture, aptly known as BoulangerHughesC3.ai, claims to have developed products that “accelerate delivery and reduce the complexity of AI business application development.”

The joint venture says artificial intelligence can “achieve a better earth economy through optimized upstream operations.” AI is also capable of “improving downstream availability, efficiency, quality and performance.”

Engie, which generated € 55.8 billion in turnover in fiscal 2020, focuses on “carbon neutral” initiatives such as renewable energy, energy storage and green hydrogen. As I said in the past, I expect all of these sectors to grow rapidly as the world focuses on reducing carbon emissions. As a result, I believe the partnership with Engie will be very lucrative for C3.ai in the long run.

C3.ai benefits

Unlike other companies in the field of artificial intelligence, C3.ai does not specialize in new standalone products. Instead, their systems work primarily in conjunction with the companies’ existing software.

In addition, the company strives to make AI easier for its customers to access and use. As Reinhardt Krause of Investor’s Business Daily explained, C3.ai seeks to “make it easier for companies to create AI applications with its out-of-the-box tools and avoid costly customization projects.”

The company has developed dozens of out-of-the-box applications for various industries, including financial services, telecommunications, manufacturing and fossil fuels, Siebel said. By using these applications, companies in these industries can quickly and easily start using AI to meet their specific needs, explained the CEO.

The result in the AI ​​stock

At 13.2 times the 2022 average analyst revenue estimate for C3.ai, IA’s stock valuation is reasonable for such a fast-growing company with great potential. Also, in the first half of fiscal year 22, C3.ai only spent $ 20 million in cash, so the company is poised to generate positive cash flow.

C3.ai is making great strides and has significant advantages over its competition, while the stock valuation is reasonable. Therefore, I recommend long-term investors to buy IA shares.

As of the date of publication, Larry Ramer had no (directly or indirectly) position on the titles mentioned in this article. The opinions expressed in this article are those of the author, subject to the publication guidelines of InvestorPlace.com.

Larry Ramer has researched and written articles on US stocks for 13 years. He was employed by The Fly and Israel’s largest business newspaper, Globes. Larry began writing articles for InvestorPlace in 2015. Some of his highly successful counter picks include GE, Solar Stocks, and Snap. You can reach him on StockTwits at @larryramer.

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