C3.ai’s Stock Down Big As Weak Results, CEO Transition, and Downgrades Weigh

C3.ai's stock price (NYSE:AI) is on track for a new low this morning, plummeting almost 30% in pre-market trading to $15.56. This dramatic drop follows the release of preliminary, unaudited first-quarter financial results that significantly missed expectations, coupled with the announcement of CEO Tom Siebel stepping down due to health reasons.

Further exacerbating the negative sentiment, DA Davidson downgraded C3.ai to Underperform with a price target of $13, citing concerns about the company's growth durability.

The preliminary Q1 figures revealed revenue in the range of $70.2 million to $70.4 million, substantially below the consensus estimate of $99.9 million. The non-GAAP loss from operations is projected between $57.7 million and $57.9 million.

Adding to the uncertainty, C3.ai announced that Founder, Chairman, and CEO Thomas Siebel is stepping down due to health issues. Siebel, in a statement, attributed the disappointing sales results to both the reorganization and his own health challenges, including multiple hospitalizations and vision impairment.

“The good news is we have completely restructured the sales and services organization,” Siebel stated, “The bad news is that sales results in Q1 were completely unacceptable.” He emphasized the company's active engagement in an executive search to identify a successor CEO.

The leadership transition is viewed by some analysts as a pivotal moment for C3.ai. Wedbush, while maintaining an Outperform rating with a $35 price target, acknowledges the transition as a net negative.

However, the firm also suggests that Siebel's departure significantly increases the chances of C3.ai becoming an M&A target within the next 3-12 months. Wedbush believes the strategic importance of AI, big data, and cloud computing convergence makes C3.ai an attractive acquisition target for both strategic and financial players.

The DA Davidson downgrade further dampens the outlook for C3.ai. The firm previously lacked confidence in the durability of C3 AI's growth, particularly given its increasing reliance on non-recurring revenue.

DA Davidson suspects the preliminary results reflect this trend, and anticipates the business may worsen before it improves. The analyst writes in a research note that the revenue which came in significantly below guidance will make the business deteriorate before any improvements occur.

C3.ai's stock has already fallen 36.17% YTD leading into this morning's drop, will see the price move to a multi year low based on current price action.