By Sam Boughedda
C3.ai Inc (NYSE:AI) was downgraded to Hold from Buy, with its price target removed by a Needham & Company analyst on Friday.
The analyst declared in the note that the company is going through a necessary but time-consuming model transition.
"C3 AI announced a shift toward a Consumption model alongside its earnings, which management expects to weigh on near-term Revenue before achieving escape velocity as more customers are onboarded and the usage-based flywheel takes hold," the analyst said. "We recently detailed our thoughts on Subscription versus Consumption pricing strategies, with a main takeaway being that a pivot in monetization is challenging, time-consuming and requires a re-think throughout the entire organization (i.e. customer engagement and sales comp structures)."
He added that the firm believes that a "strategy shift is necessary, as C3's 'elephant-hunting' for up to $50 Million deals falls flat in the current macro."
However, the analyst stated that "these transitions are historically difficult to model, as investors have been challenged to underwrite an asset value in the interim."