Is Stock Worth The Hype?

AI Basics

tech companies (AI -1.80%) One of the hottest stocks on the market this year, its stock has soared 145% in the first few months of 2023 alone. This is a big change from his 64% drop that occurred last year. A big reason for the change of fortune is the rise in popularity of artificial intelligence (AI) this year with the advent of the AI ​​chatbot ChatGPT. uses AI to help companies across industries, including oil and gas companies shelluses’s AI technology to manage equipment and proactively identify potential failures. AI has the potential to transform and improve operations in many industries, but itself remains unprofitable and its growth has stagnated.

Is a good business to invest in today, or is it a stock too risky to own?

Trading volume is through the roof

There have been times in the past when interest in’s stock trading skyrocketed, but this year was not the case. Investors are undoubtedly encouraged by ChatGPT’s potential and what it means for’s business.

AI volume chart

AI volume data by YCharts

Last month, when stock trading volumes were skyrocketing, Tom Siebel, CEO of, said: Silicon Valley Business Journal, discussing the impact of ChatGPT. “This will fundamentally change the model of enterprise applications we build,” Siebel said. He pointed out that the ability to integrate other forms of AI with things that ordinary people are comfortable using, such as search engine platforms, is a game changer for business. “This will accelerate our business because it will make hiring much easier,” he said.

Do you see profitability?

Siebel is also optimistic that’s business is currently unprofitable, but may be in the not too distant future. Within five quarters, the company could be profitable and cash flow positive. Non-GAAP (After adjustment) foundation.

Graph detailing's path to monetization.

Image Source: Q3 presentation.

With a negative 23% operating margin today, the company has a lot of work to do to reach breakeven as it invests in future growth.

However, investors should remember that this is an adjusted number, so the true breakeven point may be further away. For the third quarter of fiscal 2023 (ending Jan. 31), he posted a net loss of $63.2 million, up 60% from his loss of $39.4 million in the same period last year. Another troubling fact is that revenue of $66.7 million was down 4% year over year.

Is stock a buy?’s stock price surge this year seems unjustified given its financial position. The company expects to be profitable by the end of next fiscal year, but that also means it doesn’t see significant earnings growth so far. I’m also wary of assuming a big turnaround anytime soon, as companies are reducing investment amid fears of a possible recession this year.

Stock price volatility and heavy losses are good reasons to avoid buying The consensus price target for tech stocks is just above $20, with analysts suggesting a lot of downside risk for There certainly seems to be more hype than substance behind his gains this year, so unless financials improve significantly, investors would be better off staying away from the stock. .

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