C3.ai stock price analysis: on the cusp of a 33% meltdown

C3.ai (NYSE: AI) stock price has lost its bullish momentum as investors assess its role in the artificial intelligence industry. After soaring to the year-to-date high of $34.56 on April 3, the shares have now plunged to about $20.

C3.ai is highly overvalued

C3.ai share price has done well this year as investors place bets that it will be a major player in the AI industry, which has now gone mainstream after the launch of ChatGPT. This rally is in line with the performance of other AI companies and cryptocurrencies.

However, there are serious concerns about whether C3 will see an uptick in business activity because of ChatGPT. While there will be some initial uptick in demand as companies explore AI use case in their operations, I see no major long-term shift.

Further, it is important to consider the company’s valuation. A quick look shows that C3.ai has a market cap of over $2 billion, which is a lot of money. Now, in terms of revenue, the company made $91.6 million in 2019, which soared to $252.8 million in 2022. This is a strong and encouraging result. 

However, its losses have also widened in this period. C3 lost over $192 million in 2022 after losing over $33 million in 2018. This increase was driven by a surge in research and development and S&A expenses. Unfortunately, C3 will likely continue making losses in the coming years.

This soaring loss-making would be acceptable for a startup company seeing to gain market share. But C3.ai is not a startup. Instead, it is a company that was started in 2009, meaning that it is now a 14-year-old firm. As such, it does not make sense to give a loss-making company top dollars. 

Meanwhile, it is worth noting that C3.ai executives have been dumping shares. Precisely, Juho Parkkinen, the CFO, and Dr. Richard Levin have sold shares worth millions of dollars this year.

C3.ai stock price forecast

C3 chart by TradingView

The daily chart shows that the C3 share price is sitting at an important support level, where it has failed to move below since February 14. At the same time, the shares have plunged below the 25-day and 50-day moving averages and the Ichimoku cloud. 

Therefore, I suspect that the C3 stock price will have a bearish breakout as sellers target the key support at $13.38. This price is estimated by measuring the distance between the triple-top and the neckline. It is also in line with my recent C3 share price forecast.