Morgan Stanley Raises C3.ai Price Target, Keeps 'Underweight' Rating Despite Recent Partnership Extension and Revenue Growth

Morgan Stanley analyst Sanjit Singh raised C3.ai's price target to $22.00 from $20, while keeping an "Underweight" rating. The rating reiteration follows C3.ai's recent partnership extension with Baker Hughes and reported revenue growth of over 26% in Q4. Morgan Stanley is cautiously optimistic but has concerns about the company's long-term growth prospects and high proportion of demonstration licenses and services revenue.

Morgan Stanley analyst Sanjit Singh recently adjusted his outlook on C3.ai (NYSE: AI), raising the price target to $22.00 from $20.00 while keeping an "Underweight" rating. This decision follows C3.ai's recent partnership extension with Baker Hughes and reported revenue growth of over 26% in the fourth quarter.

The partnership extension with Baker Hughes, a leading provider of energy technology, is seen as a significant positive development. This collaborative relationship is expected to continue bolstering C3.ai's position in the oil and gas sector. Despite the positive aspects, Morgan Stanley analysts expressed concerns about C3.ai's long-term growth prospects. They noted that the company's revenue mix includes a high proportion of demonstration licenses and services revenue, which contributes to ongoing discussions about the durability of C3.ai's growth.

The analysts acknowledged that the 3-year extension of the Baker Hughes partnership and the sustained revenue growth of over 26% in Q4 qualify as a better-than-feared outcome. However, they remain cautious about the company's long-term growth trajectory, citing concerns over the high proportion of demonstration licenses and services revenue. This revenue mix has raised questions about the sustainability of C3.ai's growth.

Investors and market watchers will continue to monitor C3.ai's financial performance and strategic partnerships closely to assess the company's position in the competitive AI industry and its potential for sustained growth. The recent developments at C3.ai, including the significant contract expansions with the U.S. Air Force and renewed collaboration with Baker Hughes, are poised to substantially influence the company's narrative.

References:
[1] https://www.tipranks.com/news/ratings/sell-rating-on-c3ai-due-to-growth-concerns-and-uncertain-long-term-benefits-of-baker-hughes-contract
[2] https://www.investing.com/news/analyst-ratings/morgan-stanley-sets-novonesis-stock-overweight-with-dkk577-target-93CH-4069318
[3] https://www.investing.com/news/analyst-ratings/morgan-stanley-lifts-c3ai-stock-price-target-to-22-from-20-93CH-4069697
[4] https://simplywall.st/stocks/us/software/nyse-ai/c3ai/news/c3ai-nyseai-secures-us350m-usaf-contract-extension-expands-b