Wedbush analyst Daniel Ives sees artificial intelligence as an $800 billion opportunity and also weighed in on two SMID-cap (a contraction of “small and mid-caps”) AI stocks that have been making waves.
The Business: c3.ai, Inc. AI is an enterprise AI application development platform based out of Redwood, California. Its platform allows customers to develop, deploy and operate large-scale AI, predictive analytics and IoT applications.
SoundHound AI, Inc. SOUN is a provider of an independent voice AI platform that enables businesses across industries to deliver conversational experiences to customers.
The company was founded in 2005. It has among its customer companies such as Hyundai, Mercedes-Benz, Pandora, Qualcomm, Snap, Square, Stellantis, etc. In February, the company launched “Dynamic Interaction” with Generative AI
C3.ai At Cross Roads, Says Wedbush: c3.ai stock has had a weak run since its initial public offering in December 2020 and Wall Street is of the view that the company has a long way to go as expansion and monetization continued to be an uphill battle, analyst Ives said in a note.
The analyst noted that the company recently announced the release of C3 Generative AI, with C3 Generative AI for Enterprise Search being the first product. This provides enterprises with a transformative user experience using a natural language interface to rapidly locate, retrieve and present all relevant data across the enterprise’s information system, he said.
“While we view the generative AI integration as positive from a product perspective, we believe that AI continues to be a ‘prove me’ name and the company’s execution on these tailwinds remains to be seen,” Ives said.
SoundHound A Disruptive Name: SoundHound is a disruptive technology company, which has taken significant steps to drive growth on its platform and expand into this space, Ives said.
“Dynamics Interaction’s” features combine to create Soundhound’s Generative AI which provides people with boundless information for any personalized user query anytime., the analyst noted. He also noted that the company recently announced a targeted restructuring to reduce investments in new verticals and completed language development projects to focus on SoundHound for Restaurants.
The initiative will help reduce costs by about 40% to better align with cash flow and profitability projections, the analyst said, citing the company. The company is still guiding for 50% revenue growth in 2023 due to anticipated strength from its subscription business and aiming to be operating cash flow positive by the fourth quarter of 2023, he added.
“We believe SOUN has a lot of potential moving forward given the company’s adaptability and strong product offering which we believe could disrupt a significant area in the speech recognition space,” Ives said.”
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Financials, c3.ai Vs SoundHound: c3.ai generated revenue of $252.8 million for the fiscal year 2022 that ended June 2022, up 38% year-over-year, with $206.9 million of it coming from subscriptions. Non-GAAP gross margin expanded 2.9 points to 79%. The net loss per share was $1.84, wider than the year ago’s $0.83.
SoundHound’s revenue for the fiscal year that ended in Dec. 2022 climbed 47% to $31.1 million in 2022. The company generated a narrower loss of $0.73 for the year, better than the 2021 loss of $1.18.
The Stock, c3.ai Vs SoundHound: c3.ai stock has been on a broader downtrend since the company’s public debut. The stock has run up about 80% for the year-to-date period and has gained a more modest 5.75% over the past year.
SoundHound, which IPOed on April 28, 2022, has seen its shares rally by over 37% year-to-date. Ives has an Outperform rating and a $7 price target for the stock.
In premarket trading on Monday, c3.ai shares plunged 5.98% to $18.86, while SoundHound rose 1.65% to $2.47, according to Benzinga Pro data.