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C3.ai CEO Tom Siebel Says the Stock Is a ‘Screaming Buy.’ Here’s Why.

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Shares of enterprise artificial intelligence software firm C3.ai are higher on a strong fiscal-third-quarter report.

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C3.ai

stock is trading modestly higher after the provider of enterprise artificial intelligence software posted better-than-expected results for its fiscal third quarter ended Jan. 31.

“We killed it,” CEO Tom Siebel said in an interview. “We had an exceptionally strong quarter, exceeding everybody’s expectations.”

For the quarter, C3.ai (ticker: AI) reported revenue of $69.8 million, up 42% from a year ago, and ahead of both the company’s forecast range of $66 million to $68 million, and the Street consensus view for $66.8 million. The company had an adjusted loss in the quarter of 7 cents a share, narrower than the Street consensus forecast for a loss of 27 cents a share. Under generally accepted accounting principles, the company lost 38 cents a share.

The company now sees revenue for the April 2022 fiscal year in the range from $251 million to $252 million, with a non-GAAP loss in the range from $90 million to $94 million; previous guidance called for revenue from $248 million to $251 million, and a loss in the range from $100 million to $108 million.

C3.ai also announced the resignation of Chief Financial Officer Adeel Manzoor, just a few months after he taking on the role in December. Without providing specific details, Siebel said Manzoor resigned for reasons “highly personal and sensitive in nature,” that concerned “a personal relationship.” He said the departure had nothing to do with Manzoor’s role at C3.ai. The company named chief accounting officer Juho Parkkinen to immediately step in as CFO.

C3.ai has been on a wild ride in the public market. The company priced its initial public offering in December 2020 at $42 a share, and opened for trading at $100. A few weeks later, the stock rose to as high as $183.90 on an intraday basis, but the stock has been gradually sinking ever since, reflecting a sharp contraction in the market’s willingness to pay high premiums for high-growth companies operating in the red. Thursday morning, the stock is up 4.2%, to $23.60.

Siebel is undaunted by the volatility, and sees a huge addressable market for enterprise AI applications. He says the company has built 42 vertical market applications (and counting) for utilities, chemicals manufacturing, financial-services firms, and the federal government, among other areas.

Siebel notes that C3.ai has about $1 billion in cash and investments–about 40% of the company’s $2.4 billion market cap. “We’re a massively undervalued security,” he says. Siebel notes that the company has a $100 million stock-repurchase program, but in general he thinks “the valuation will take care of itself.”

He says the company’s goal is to establish itself as the market leader in enterprise AI software. “We did that at


Oracle

(ORCL) with relational database-management software, and we did it at Siebel Systems in customer-relationship management,” he says. “Investors may not understand the magnitude of the addressable market. But that’s OK. I don’t feel mistreated. It’s fine. But the stock is a screaming buy.”

Asked about competition, Siebel says the key rivals used to be International Business Machines’ (


IBM

) Watson and


General Electric
‘s
(GE) Predix units, but he notes that neither succeeded. “Today, the competitor is build-it-yourself, cobbling things together,” he says. “Virtually every one of our customers tried to do that. 99% of our revenue last quarter came from companies that tried to build the same thing themselves, once, twice, or three times.”

Write to Eric J. Savitz at eric.savitz@barrons.com

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