Why C3.ai Stock Collapsed This Week

Key Points

• C3.ai is seeing declining sales and huge operating losses.

• The CEO is leaving due to health issues.

• Shares don't look appealing because of the company's history of losing money.

• 10 stocks we like better than C3.ai ›

Shares of C3.ai (NYSE: AI) fell 19% this week, according to data from S&P Global Market Intelligence. The artificial intelligence (AI) company, which builds enterprise applications, released dismal preliminary financial results for its latest quarter, while the company's CEO announced that he would be departing the company. C3.ai has never generated a profit, and its stock is down 90% from all-time highs set from its initial public offering (IPO).

Here's why the stock was slipping yet again this week.

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Leaving CEO, weak earnings

C3.ai posted preliminary results for its recent quarter ending in July this week. The numbers were not good. Revenue was estimated to be around $70 million, down from $87.2 million in the year-ago quarter, with a generally accepted accounting principles (GAAP) operating loss of $125 million compared to $73 million in the year-ago quarter. These are ugly preliminary figures, which sent the stock down this week.

What's more, C3.ai's current CEO, Thomas Siebel, announced his intended retirement due to health problems. The company has not found a replacement yet, which provides more uncertainty for shareholders. Declining revenue, growing operating losses, and a management team in disarray is a recipe for disaster for any stock price.

Image source: Getty Images.

Is C3.ai stock a buy?

This company has never generated a profit. In fact, as it has grown, its net loss has only gotten worse over the years, hitting $289 million over the last 12 months with its latest audited results. These preliminary results indicate further losses in the quarters to come.

Despite the technology sector being in a huge AI bull market, a company with AI in its name cannot generate a profit and is now seeing declining revenue. This should be a huge flashing warning sign for any investor. The company is in an ideal operating environment with money getting thrown around with no regard for return on investment as long as the project is related to AI, and yet the financial statements still look ugly. This should keep investors away from buying C3.ai stock today.

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Brett Schafer has no position in any of the stocks mentioned. The Motley Fool recommends C3.ai. The Motley Fool has a disclosure policy.