Want a 219% Return? Buy This Growth Stock, Says Wall Street

Despite broad stock market indexes such as the S&P 500 Nasdaq 100Some technology stocks are not trading at all-time highs. There are many attractive opportunities for investors who have some cash.

C3.ai (NYSE:AI)The company is a pioneer in enterprise artificial intelligence (AI), and sells everything from ready-made solutions, custom-built applications, to eight of the most important industries in the globe. C3.ai bridges this gap for companies who can’t develop AI internally.

Its stock is currently trading at $38.25. One Wall Street firm thinks it can soar 219% up to $122. Here’s why.

Image source: Getty Images.

From oil to technology

Some companies are unable to access the amazing benefits of artificial intelligence through their own development. How can an oil and gas company attract the talent needed to succeed when high-skilled programmers are available at technology giants?

AI can reduce carbon emissions by increasing efficiency. It also has predictive capabilities that can detect equipment failures before they become catastrophic. That’s why 35% C3.ai’s revenues come from the oil-and-gas industry. And one industry leader has taken this relationship to the next level. 

Baker Hughes has worked with C3.ai to build an entire suite of AI applications specifically for oil and gas companies. The project is called BHC3.ai. It has attracted multiyear agreements with customers such as Royal Dutch Shell

C3.ai, however, is a technology company and is also impressing its peers. It is working with tech royalty to develop AI applications. Microsoft and Alphabet‘s Google. The goal is to provide AI-driven solutions to the manufacturing, healthcare, financial services industries (among others) to drive them toward the future. 

Accelerating financial performance

Investors aren’t thrilled with C3.ai’s growth rate since its public listing in December 2020. After some initial teething problems, the company is now experiencing a rapid increase of new customers and subsequent acceleration in its revenue growth.

Metric

Fiscal 2019

Fiscal 2022 (Q1)

CAGR

Total customers

21

98

98%

Data source: C3.ai. CAGR = compound annual gain rate

After determining the scope of the project, it can take up to six months for an AI application to be delivered to a customer. Revenue growth can often lag behind customer development, so the increase in customers shows that the next few quarters could prove to be very strong.

Analysts are certain that this is the case, with C3.ai expected to exceed $200 million in yearly revenue in fiscal 2022 for the first time.

Metric

Fiscal 2019

Fiscal 2022 (Estimate)

CAGR

Revenue

$92 Million

$246 million

38%

Data Source: Yahoo! Finance. Finance.

Why this stock is worth buying

The market for artificial intelligence will grow to $360 million annually by 2028. That’s a compound annual rate of more than 33%, which is a significant increase from 2021. C3.ai’s revenue growth is faster than that so it’s likely that the company will gain a larger share of this market.

C3.ai is the industry’s largest enterprise AI platform, making 1.7 million predictions per day on 24.4 trillion data elements. C3.ai’s ability to predict from many different sources could set it apart from other competitors with a narrower approach. C3.ai has a footprint that spans oil and gas, financial services, and the life sciences. 

Wall Street firm Needham has a Street high 12- to-18-month price target for C3.ai stock at $122 a share. However, it’s worth noting that it did reduce the target from $146. The company has yet to prove its ability generate profits and may continue to lose while scaling up. The company’s 78% gross margin allows it to invest in growth. When enough revenue is generated, it can cut back on expenses to generate earnings for investors. 

A share price of $122 may seem conservative, but it has some of the best tech titans around. 

This article is the writer’s opinion. “official”Motley Fool Premium Advisory Service recommends the following: We’re motley! We are all different!

Source link

Leave a Reply

Your email address will not be published.