What happened
Is C3.ai (AI -0.72%) just a momentum stock? More and more, it's starting to look that way.
After surging 6.5% over the weekend, then dropping 11% on Tuesday and gaining back more than half of that on Wednesday, shares of the artificial intelligence stock were on the move once again Thursday morning -- down 7.6% as of noon ET.
What's stranger still, they're going down on good news.
So what
Bright and early Thursday morning, C3.ai announced that it has won a contract with the United States Air Force "to provide mission-critical AI applications for the U.S. Air Force Crowd-Sourced Flight Data Program."
Partnering with Intelligent Waves (a privately held government contractor, according to data from S&P Global Market Intelligence), C3.ai will develop artificial intelligence applications for the 59th Test and Evaluation Squadron (59TES) at Nellis Air Force Base in Nevada. These apps will process "terabytes of high-fidelity data now recorded on both test and operational aircraft" to identify and fix "anomalies" discovered in weapons systems such as the F-35 stealth fighter jet "before those systems are required in combat."
Now what
Two things jump out at me from this announcement.
First, not all the money from this contract will go to C3.ai itself, because the company is partnering with another company -- and will presumably split the revenue with that other company. And second...we don't have any idea how much revenue we are even talking about here -- even before it's cut in half -- because C3.ai didn't say how much the contract is worth.
Now, I'd classify both these observations as mildly negative for C3.ai stock. But even so, overall, the winning of a U.S. Air Force contract to begin with has to be considered good news for the company -- yet C3.ai stock is going down regardless.
So what does this mean for investors?
The fact that C3.ai stock is going down on good news today only highlights the fact of how much, and how fast, C3.ai stock has gone up over the past month -- over 150%. When you consider that just a month ago, C3.ai stock was worth just $11 a share, its current valuation -- north of $24 -- feels a bit frothy.
How much is C3.ai stock? With no profits to value it on, that's hard to say. But the stock's inability to hold on to its gains even in the face of objectively good news reinforces the impression that this stock is overvalued at nearly nine times trailing sales.
