C3.ai,
Cloudflare,
and
DigitalOcean Holdings
stocks were upgraded Tuesday as an analyst cited the future of artificial intelligence as a positive catalyst for growth.
Oppenheimer analyst Timothy Horan upgraded shares of
C3.ai
(ticker: AI), Cloudflare (NET), and DigitalOcean (DOCN) to Outperform from Perform on Tuesday.
“We think they are set to outperform as evidence accumulates that AI
can lead to both major new revenue sources and productivity improvements,” Horan wrote in a research note.
Horan set a price target of $40 on C3.ai stock, 43% higher than the stock’s closing price on Monday. The analyst said that C3.ai is one of the few pure-play AI stocks, and is seeing strong demand.
Horan’s upgrade comes after C3.ai said in September that it expects to be cash-flow positive in the fourth quarter of fiscal 2024 and in fiscal 2025. However, C3.ai is investing in generative AI and does not expect to be non-GAAP profitable in the fourth quarter of fiscal 2024.
C3.ai stock was rising 5% to $29.45 on Tuesday. Shares have rocketed 163% in 2023, as stocks with AI exposure have seen major gains amid investor excitement surrounding the future of the technology and the impact it can have on these companies. However, the stock has slipped 36% from its 52-week closing high on June 15.
Horan set an $85 price target on Cloudflare stock. He wrote Tuesday that the company is deploying AI infrastructure on platform Workers AI, and in doing so is partnering with some of the largest technology companies.
“Its Workers AI platform is not even two months old and is already seeing strong demand and interesting new user cases, both small start-ups/developers and large enterprises,” Horan said.
Shares of Cloudflare were 1.8% higher to $74.13, and were on pace for their highest close since August 2022, according to Dow Jones Market Data. The stock has climbed 64% this year, as Cloudflare, along with other software businesses, overcomes customer-spending headwinds as interest rates and inflation remained high.
DigitalOcean stock got a $37 price target. “AI demand is clearly strong and enterprise adoption is set to surge,” Horan said.
The analyst’s previous Perform rating on shares of the cloud-infrastructure firm was in part due to an uncertain economy and tight capital markets that pressured companies fund-raising abilities. However, with interest rates potentially coming down soon, Horan sees this headwind a thing of the past.
DigitalOcean stock was up 0.9% to $28.86. Shares have risen 13% so far this year.
Write to Angela Palumbo at [email protected]
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