NYSE: Is the C3.ai share price overhyped?

Is the surge higher in the C3.ai’s share price sustainable?

The C3.ai Inc (All Sessions) share has been part of the recent global Artificial Intelligence (AI) buying frenzy and has risen by more than 225% year-to-date, having previously dropped 94% from its December 2020 peak.

The C3.ai share price is thus rather volatile, to say the least.

It dropped by 13% on 1 June, for example, when the artificial intelligence software developer reported fourth quarter results, beating expectations on the top and bottom lines but offering a forecast that disappointed analysts’ expectations.

Within a matter of a week the C3.ai share price had not only recouped these losses but surged higher by nearly 30% despite some analysts being slightly worried about multiple revisions about what C3.ai claim to be their customers.

Apparently some quarters wonder about whether the technology company’s CEO Tom Siebel is perhaps exaggerating not only the company's customer base but also revenue opportunities.

When faced with exceptionally high share price volatility, such as that of C3.ai, it may make sense to trade shares with a technical rather than a fundamental approach. This way strict risk- and money management rules, such as using stop loss or even a stop and reverse orders, can be applied.

C3.ai analyst rating

Refinitiv data shows a consensus analyst rating of ‘hold’ for C3.ai – 1 strong buy, 1 buy, 6 hold, 3 sell and 1 strong sell - with the median of estimates suggesting a long-term price target of $27.00 for the share, roughly 25% lower than the current price (as of 08 June 2023).

IG sentiment data shows that 100% of clients have C3.ai long positions which may point to over exuberance. Trading activity over this week and month shows 51% and 52% of sells respectively, though, but this could be due to profit taking.

C3.ai – technical view

The parabolic 157% rally in the C3.ai share price from its early May lows, boosted by better-than-expected earnings by the likes of Nvidia, and a general market AI buying frenzy, seems to have run its course.

Unless Wednesday’s high at $39.33 is overcome on a daily chart closing basis, a lower high below last week’s seven-month high at $44.02, is in the process of being formed. It would indicate that cracks are beginning to appear in the share’s bullish picture.

C3.ai Daily Chart

A fall through Wednesday’s $35.30 low, made close to the $34.68 April peak, would likely lead to further selling taking the C3.ai share price back down to last week’s low at $30.26 and lower still.

Even if a typical Elliott wave abc zig-zag correction were to be seen, the 55-day simple moving average (SMA) at $25.06 could be reached over the coming days, that is around 30% below the current price (as of 08 June 2023).

Given the recent high volatility in the C3.ai share price, it is probable that another interim top will soon be formed, just as was the case in April.

C3.ai Weekly Chart

For this toppish view to become void, a rise above the late May high at $44.02 would need to be seen. Only then could the next higher November 2021 peak at $53.82 be in play.