C3.ai (NYSE:AI) has pulled back in recent weeks, but it’s fair to say that the market remains bullish on AI stock. Shares in this provider of enterprise artificial intelligence software bolted higher during January.

That’s when investors, after Microsoft’s (NASDAQ:MSFT) reported $10 billion investment into ChatGPT developer OpenAI, started experiencing renewed excitement about the AI mega-trend. With ChatGPT’s rise viewed as a sign of accelerated adoption of generative AI technology, the market placed its bets on other stocks with high exposure to this trend.

It has also helped that C3.ai struck while the iron was hot, announcing the launch of its C3 Generative A.I. Product Suite. Yet despite these recent developments, while market participants have become more bullish, the same can’t be said about sell-side analysts. By-and-large, they are less upbeat.

The Sell-Side’s Current Stance

According to Marketbeat, an online investing resource that aggregates sell-side ratings, the current consensus analyst rating for C3.ai stock is “hold.” In fact, out of 11 analyst ratings available, seven rate it a “hold,” with just two rating it a “buy,” and two  rating it a “sell.”

Interestingly enough, this consensus opinion is unchanged, compared to where it was before “A.I. mania” first swept the market in January. Back then, AI stock also had a consensus “hold” rating, albeit with a slightly lower average price target ($16.80 versus $20.45 per share today).

In the past two months, only one sell-side analyst (DA Davidson’s Gil Luria) has initiated coverage. In his research note, Luria assigned shares a “buy” rating, and a $30 per share price target, on Feb. 2.  Luria cited his view that the rise of generative AI is a “game changer for the company” as the one reason behind his rating.

Another analyst, JMP Securities’ Patrick Walravens is the only other Wall Street analyst with a “buy” or equivalent rating on AI. Earlier this month, Walravens reiterated his “market outperform” rating, and raised his AI price target from $19 to $27 per share.

Most Analysts Consider It a ‘Show Me’ Stock

The analysts from DA Davidson and JMP Securities concur with the market’s view on AI stock, but why does the opinion of the rest of the sell-side differ? Let’s look at some of the less upbeat analyst community about this hot A.I. play.

On March 2, Marketwatch.com reported on the stock’s post-earnings rally, and how it contrasted with analyst sentiment. For example, Needham’s Mike Cikos, who has maintained a “hold” rating on AI stock since September, believes it is too early for the company to declare success with its transition to a consumption-based pricing model.

Other analysts, like Morgan Stanley’s Sanjit Singh and Deutsche Bank’s Brad Zelnick, who both hold “sell” or equivalent ratings on AI, have expressed similar skepticism. Both believe that C3.ai’s valuation is already pricing-in a growth re-acceleration that has yet to arrive.

The rest of the sell-side considers C3.ai to be a “show me” stock. It won’t be until the aforementioned trends make an impact on the bottom line that they will change their view.

The Verdict

In C3.ai’s recent quarterly earnings release, CEO Thomas Siebel provided statements that suggest that the company is on the verge of experiencing a big jump in revenue growth and a move towards non-GAAP profitability as a result.

There’s no reason to doubt Siebel’s statements. However, it may be wise to adopt the sell-side’s “show me” stance. With this stock more than doubling in price over the past three months, C3.ai’s improving fundamentals appear to be priced-in.

Recent “A.I. mania” has already faded, and could continue fading in the months ahead. More of the uncertainty surrounding the company’s transformation into a faster-growing, profitable firm could clear up. This in turn could strengthen the bull case.

With this in mind, you might take a similarly-cautious stance on AI stock.