What happened
On a basically flat day for stock markets Tuesday, shares of artificial intelligence (AI) stock C3.ai (AI -0.41%) are doing better than most -- up 3.2% as of 10:30 a.m. ET. And according to the market watchers at StreetInsider, there's one reason and one reason only that C3 stock might be doing so well today.
Stock options traders are buying calls 4.5 times more heavily than they're buying puts today. In other words, they're betting heavily that C3.ai stock will go up after earnings, and not down.
But why?
So what
In just a couple of days -- on Thursday, March 2, after close of trading -- C3.ai stock will report its fiscal 2023 third-quarter earnings results. Judging from the actions of the options traders, they're feeling pretty optimistic that C3.ai is going to beat expectations on Thursday.
They may even be right.
After all, it's not like Wall Street analysts have set a high bar for C3's results this quarter. According to Yahoo! Finance estimates, C3.ai collected only $64.2 million in revenue in Q3, which would be 8% less than a year ago. "Earnings" for the unprofitable AI company, meanwhile, will be less than zero. Indeed, with a $0.22-per-share loss predicted, losses for C3 look set to triple year over year.
Now what
In other words, analysts are predicting a train wreck quarter for C3.ai stock. And since that's what's being expected, anything better than an abject disaster could qualify as beating estimates, and set the stage for this stock to soar. Quarterly losses could literally double year over year and traders would consider that good news.
In fact, even if C3.ai reports lousy results, there could still be good news in Thursday's report, because in addition to telling investors how much money it lost in Q3, C3.ai will probably give guidance for how much money it hopes to earn in the future. In that regard, the hype surrounding artificial intelligence continues unabated, with Axios reporting yesterday that companies are "scrambling" to build AI into their tech, and Business Insider reporting that Meta Platforms in particular will incorporate AI functions into WhatsApp, Facebook Messenger, and Instagram.
Granted, there's no assurance C3.ai's products will be chosen to facilitate adding AI to tech company offerings -- or even if they are, that this will generate enough revenue to turn C3 profitable anytime soon. To the contrary, most analysts warn that C3.ai stock won't earn even pro forma profits before 2026 at the earliest.
Just the hope that C3.ai will find a way to profit from the AI revolution, however, could be enough to keep the momentum going at this momentum stock.
