The AI market is bigger than ever before, but not all AI stocks are created equal. Joel Lim, a financial analyst at Trading.biz, points out the 2 AI stocks that investors may want to sell sooner rather than later.
Though many AI stocks benefit from a rippling wave of popularity and attention in the sector, many are accompanied by high risks. Investors’ attention to AI’s wonderful potential drives prices up. Still, many companies find it challenging to profit with the heavy investments required to compete.
Joel Lim, a financial analyst at Trading.biz, has pointed out the 2 AI stocks that investors may want to sell sooner rather than later. Companies are struggling to establish profitable foundations, and with the risk they bring, there are certainly better places to invest their money.
Twilio and C3.ai are the two stocks with struggling financials that you may want to consider selling before it’s too late.
Twilio (TWLO)
Twilio is a cloud communications company based in San Francisco. Despite the stock showing promise early this year, it has struggled to establish itself and a consistent profit stream. The NASDAQ tech 100 severely outperformed Twilio last year, as shown in the chart below.
In addition to a GAAP loss of $361.7 million, Twilio only saw a 5% revenue growth for Q4. Twilio has also seen underperformance in its segment business, targeting customer engagement and data. Joel Lim notes, “Though Twilio started an operational review to optimize its segment business, it slow growth is not promising for short-term returns.”
Twilio also launched a share repurchase program in February of this year to help its price. However, the repurchasing schedule is set to last until the end of this year and until closer to that time will not show a significant difference in performance.
C3.ai (AI)
C3.ai specialises in enterprise AI and, despite showing a large jump earlier this year, is facing slowing momentum and lacks a financial foundation. C3.ai’s price is inflated due to C3.ai’s one large customer and joint venture partner, Baker Hughes.
To give you an idea of where C3.ai stands, it reported a 5% revenue increase for the full year of 2023 and a GAAP net loss per share of $-0.58. “Last year’s growth was not the most promising, and after a similar outlook for this year, investors are better off looking at hotter, more profitable AI stocks,” says Joel Lim.
The business reported a positive cash flow of $16.3 million in Q4 2023 but has yet to reach the threshold of a profitable business. C3.ai reported the plan to turn a profit by the end of fiscal 2024 or the end of April, but in Q3 of fiscal 2024, it reported a further drop in GAAP net loss per share.
Despite a rise in revenue expectations, C3.ai is not the best stock to hold by any means and investors may want to sell before a profit margin miss.
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