On Tuesday, Piper Sandler updated its assessment of c3.ai (NYSE:AI) shares, increasing the price target to $42 from the previous $24 while retaining a Neutral rating on the stock. The revision follows c3.ai's third-quarter earnings, which surpassed expectations with revenue reaching $94.3 million, a quarter-over-quarter increase of 8.2%, and exceeded the anticipated $91 million forecasted by analysts.
The company's growth has been attributed to its performance in both federal and commercial sectors, gaining new clients and increasing revenue from existing ones. Moreover, the analyst highlighted the potential benefits from c3.ai's expanded collaboration with Microsoft (NASDAQ:MSFT), noting that it could lead to significant gains not yet accounted for in current or consensus estimates.
Management at c3.ai has expressed confidence in further expanding its federal business, citing artificial intelligence spending as a priority for the new administration. The company is also considering various strategies with Baker Hughes (NASDAQ:BKR) regarding their partnership renewal, aiming to balance the stability provided by a major client with the flexibility to pursue new growth avenues.
From a financial perspective, c3.ai is focusing on growth over profitability, a strategy deemed appropriate given the substantial opportunities seen in the enterprise AI market.
The price target adjustment to $42 is based on an 8.0x multiple of the firm's calendar year 2026 revenue estimate of $555 million, which is an increase from the earlier 5.0x multiple of the calendar year 2025 revenue estimate of $435 million. Piper Sandler's projections include a 26.4% growth in fiscal year 2025 and a 23.8% growth in fiscal year 2026.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.