C3.ai Earnings Preview: Can the AI Stock Reverse its Pre-Report Slide?
Artificial intelligence software company C3.ai (AI) is scheduled to report earnings on Wednesday, after the market close. Company leaders will host a conference call at 4:00 p.m. CTS.
A stock market rout that has taken hold of the U.S. equity market has sunk its claws into technology stocks, and C3.ai is no exception. The stock has shed 20% of its value over the last several weeks, and losses have accelerated over the past several days.
The market has undergone a repricing over the past week after several economic prints injected a risk-off tone into equity markets. On top of the broader risk-off mood, semiconductor and AI-related stocks have taken one to the chin after TD Cowen analysts Michael Elias noted that Microsoft (MSFT) has cancelled leases for U.S. data centers.
The development has brought the focus back to the pace of investment in AI and whether it is sustainable. While not directly applicable to C3.ai, it does underpin worries about the broader industry, and that is already evident in the price action of not only C3.ai but also other large players in tech.
While C3.ai has a much smaller market capitalization than large tech players like Nvidia (NVDA), it represents a niche way for traders to play the software-focused side of the AI industry, with healthy daily trading volume, including a liquid options structure. Nvidia is set to report earnings on Thursday,potentially affecting broader market sentiment.
Analysts expect AI to report a loss of -$0.25 in earnings per share (EPS) for the third fiscal quarter, according to TradingView. Revenue is expected to cross the wires at $98.13 million. A year ago, AI reported EPS of -$0.13 on $78.4 million in revenue.
C3.ai has managed to beat expectations in the last four reporting periods, but a beat under the current circumstances may not be enough to stem the recent losses. That said, traders should be cautious of taking trades on the long side that are not risk defined.
Trading C3.ai earnings
AI trades with an implied volatility rank (IVR) of 78.9, meaning volatility is elevated compared to the past 12 months of trading.
The expected move per the options market is +/- 3.76 points, or 14% of the current stock price. That puts the earnings move well above the average 5% to 10% move typically seen at S&P 500 companies.
AI is trading at levels not seen since November. There is a support level near the 24 handle that could come into play if AI continues to drop. Alternatively, resistance near the 30 level could prove significant. These levels are within the expected move, so prices may not respect these levels post-earnings.
Thomas Westwater, a tastylive financial writer and analyst, has eight years of markets and trading experience. #@fxwestwater
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