Options traders are preparing for a potential $240 million swing in C3.ai’s (AI) market value after the AI software company announces its first-quarter earnings results, which are set to be released after markets close on Wednesday. Based on options pricing, traders expect C3.ai’s stock to move roughly 10.7% in either direction after the report. Interestingly, it is worth noting that the firm’s after-earnings price moves in the past 12 quarters have mostly been larger than this figure, which suggests that current option prices might be undervalued.
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The expected earnings move is determined by calculating the at-the-money straddle of the options closest to expiration after the earnings announcement. This estimate is derived from the $16.50 strike price, with call options priced at $1.01 and put options at $0.78.
What Else to Watch For
When C3.ai reports earnings, investors will likely be watching the firm’s subscription revenue growth. Indeed, in the previous year’s quarter, C3.ai brought in $87.21 million in revenue, which had beaten expectations. Interestingly, most of that revenue, approximately 84.2%, came from subscription services, as illustrated in the image below. The company also closed 71 new agreements during that period, including 52 pilot programs. This was an increase of 122% and 117% year-over-year, respectively.
As a result, investors will be looking to see if C3.ai can continue to turn pilot programs into long-term contracts, especially with large organizations and government agencies. Updates on how customers are using its generative AI tools in industries like manufacturing, defense, and healthcare will also be important. As a result, how the company performs in these areas could strongly influence whether the stock moves up or down after earnings.
What Is the Price Target for AI Stock?
Overall, analysts have a Hold consensus rating on AI stock based on three Buys, five Holds, and two Sells assigned in the past three months, as indicated by the graphic below. Furthermore, the average AI price target of $23.63 per share implies 41.4% upside potential. At the same time, TipRanks’ AI analyst has a Neutral Rating with a $29 price target.
