C3.ai (NYSE: AI) stock is sinking in Wednesday's trading. The company's share price was down 8.1% as of 11 a.m. ET. Meanwhile, the S&P 500 index was up 0.6%, and the Nasdaq Composite index was up 1.2%.
C3.ai is falling today after JPMorgan published bearish coverage on the stock. The firm's analysts downgraded their rating on C3.ai stock and maintained a one-year price target of $28 per share. As of this writing, the analyst's target still implies additional downside risk of 27%.
JPMorgan turns bearish on C3.ai stock
JPMorgan released its latest coverage on C3.ai stock before the market opened this morning, and investors are reacting to concerns raised in its coverage note. While the firm's analysts acknowledged that the company was chasing after large and rapidly shifting opportunities in the artificial intelligence (AI) space, they expressed disappointment with its sales growth and margin.
JPMorgan's analysts acknowledged that C3.ai's revenue growth has been accelerating, but they pointed to the rising costs needed to propel that sales growth as a sign that the business is not seeing sufficient profitability improvements as it scales up. While the firm's analysts maintained its one-year price target of $28 per share on the stock, C3.ai's share price has risen a lot since the firm last issued coverage on the stock. Even with a big pullback today, the stock is still up roughly 33% across this year's trading.
What's next for C3.ai stock?
While JPMorgan's bearish note on C3.ai is the coverage moving the market today, another team of analysts had a more favorable outlook on the stock. Before the market opened today, Canaccord published a note raising its one-year price target to $40 per share and maintaining a hold rating on the stock.
The analysts praised C3.ai's recently released results for the second quarter of its current fiscal year and saw the company's sales growth and margin improvements as positive indicators, but valuation still appears to be a concern. Canaccord's new price target is roughly 5% higher than C3.ai's current trading price, but it's also roughly 4% lower than yesterday's market close.
With the software and consulting specialist trying to solidify early foundations in the rapidly shifting AI space, C3.ai is a difficult stock to value right now. While it's possible that shares could post explosive growth from current pricing levels, the speculative nature of the company's growth trajectory means the stock is also relatively high risk.
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JPMorgan Chase is an advertising partner of Motley Fool Money. Keith Noonan has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends JPMorgan Chase. The Motley Fool recommends C3.ai. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
