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Down Over 40% This Year, Is C3.ai Stock Too Cheap to Pass Up?

Rhys NorthwoodSaturday, Apr 19, 2025 6:17 am ET
20min read

C3.ai (NYSE: AI) has been one of the most volatile stocks in the AI sector in 2025, plummeting 47% from its January high of $36.78 to a year-to-date low of $17.03 by April 17. While the stock’s decline has sparked debates among investors, the question remains: Is this a buying opportunity for a company with strong fundamentals, or a warning sign of deeper structural issues?

Ask Aime: Is C3.ai's price drop a sign of buying opportunity or deeper industry issues?

A Volatile Journey: Stock Performance in 2025

The year began with optimism, as C3.ai opened at $36.78 on January 3. However, the stock faced relentless headwinds:

  • February 26 Earnings Shock: Despite reporting 26% YoY revenue growth to $98.8 million, the stock dropped 10% on concerns over its GAAP net loss of $(0.62) per share and broader AI sector skepticism.
  • Tariff Panic: President Trump’s announcement of tariffs on imported goods amplified market fears of reduced demand for enterprise AI solutions, further pressuring the stock.
  • April Lows: By mid-April, the stock hit a year-to-date low of $17.03, erasing nearly half its value since January.

AI P/S

Fundamental Strength Amid Market Skepticism

While the stock has cratered, C3.ai’s operational metrics tell a different story:

  1. Revenue Growth: The company’s Q3 2025 revenue hit $98.8 million, up 26% YoY. Subscription revenue, which now accounts for 87% of total revenue, grew 22% YoY to $85.7 million.
  2. Strategic Partnerships: Collaborations with Microsoft, AWS, and McKinsey QuantumBlack signal expanding market reach. The C3 Generative AI platform, a first-of-its-kind “agentic AI” tool, has garnered industry praise.
  3. Liquidity: With $724.3 million in cash reserves, the company is well-positioned to weather market turbulence and invest in growth.

However, the stock’s valuation metrics now appear compelling:

Ask Aime: Is C3.ai's stock a buy after its steep decline, or are there deeper issues?

  • Market Cap: At $19.35 per share (April 17 close) and 132.74 million shares outstanding, the market cap is $2.57 billion.
  • P/S Ratio: The trailing 12-month revenue (assuming annualized Q3 results) would be approximately $395 million, giving a P/S ratio of 6.5x—well below the software sector average of 8.9x.

AI Total Revenue YoY, Closing Price

Risks and Challenges

Despite the attractive valuation, risks persist:

  • Net Losses: While non-GAAP metrics improved, the GAAP net loss remains a red flag for value investors.
  • Sector Sentiment: The AI sector faces heightened scrutiny, with valuations under pressure as companies struggle to prove ROI.
  • Execution Pressure: Competitors like Microsoft and AWS are expanding their own AI tools, raising questions about C3.ai’s long-term differentiation.

Analyst Forecasts vs. Reality

Analysts had high hopes for C3.ai in 2025:

  • Yahoo Finance: A median 12-month target of $115, with bullish estimates up to $166.
  • TopGraphs: A conservative $80–$100 range.

Yet the stock’s YTD decline reflects a stark disconnect between fundamentals and sentiment. The $19.35 price is 60% below the lowest analyst estimate, suggesting the market may have overreacted to short-term noise.

Conclusion: A Calculated Gamble for Long-Term Investors

C3.ai’s stock is undeniably cheap by valuation metrics: a P/S ratio of 6.5x versus sector averages, paired with a robust revenue growth trajectory and $724 million in cash. However, the path to profitability remains critical.

Investors must weigh two scenarios:
1. Best Case: If C3.ai can reduce losses and capitalize on its partnerships, the stock could rebound sharply. A return to pre-earnings levels (e.g., $26–$30) would imply 30–50% upside.
2. Worst Case: Persistent net losses and sector headwinds could keep the stock depressed.

For risk-tolerant investors, the current valuation offers asymmetric upside. At $19.35, the stock is priced for failure—but with a P/S ratio below peers and a growing revenue base, C3.ai may be too cheap to ignore.

AI Cash and Cash Equivalents YoY, Cash and Cash Equivalents

In 2025, C3.ai’s stock is a test of conviction. While risks are real, the math favors those willing to bet on its long-term potential in the AI ecosystem.

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1kczulrahyebb
04/19
Damn!!the block option data in BABA stock saved me much money!
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Searchingstan
04/19
@1kczulrahyebb How long you been holding BABA? What’s your strategy with Alibaba?
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bnabin51
04/19
@1kczulrahyebb I had BABA once, sold too early. Regret not holding on.
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Disclaimer: the above is a summary showing certain market information. AInvest is not responsible for any data errors, omissions or other information that may be displayed incorrectly as the data is derived from a third party source. Communications displaying market prices, data and other information available in this post are meant for informational purposes only and are not intended as an offer or solicitation for the purchase or sale of any security. Please do your own research when investing. All investments involve risk and the past performance of a security, or financial product does not guarantee future results or returns. Keep in mind that while diversification may help spread risk, it does not assure a profit, or protect against loss in a down market.
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