C3Ai Stock Surges on $500 Million Government Contract

Options volume is running at 7 times the intraday average

Digital Content Manager
Dec 10, 2021 at 10:23 AM
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C3Ai Inc (NYSE:AI) is surging today, last seen up 6.4% to at $34.15 and earlier trading as high as $36.33. This breakout comes after the U.S. Department of Defense (DoD) awarded the software company a five-year agreement worth $500 million. Under the partnership, the DoD can use C3AI's products for models and simulations to help counter cyber threats.

Today's pop has helped C3Ai stock bounce back from its Dec. 2, all-time low of $27.53. Though AI has been trending lower since going public almost exactly one year ago, the shares are now eyeing their best week since mid May. Overhead pressure remains at the 20-day moving average, however, which has contributed to AI's 75.5% year-to-date deficit.

Analysts remain pessimistic towards the stock, with five of the nine in question carrying a tepid "hold" or worse rating, while the remaining four say "buy" or better. Meanwhile, the 12-month consensus target price of $58 is a whopping 71.2% premium to current levels.

Short sellers are hitting the exits, though. Short interest dropped 6.6% over the last two reporting periods, yet the12.88 million shares sold short still accounts for 16.1% of the stock's available float, or roughly one week's worth of pent-up buying power.

The options pits are firmly bullish. At the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), C3Ai stock sports a 50-day call/put volume ratio of 5.67, which sits higher than 94% of readings from the past year. This implies long calls are getting picked up at a much quicker-than-usual clip. 

Drilling down to today's options activity, 14,000 calls and 5,501 puts have crossed the tape so far, or seven times the intraday average. Most popular is the December 30 put, followed by the 40 call in the same monthly series, with new positions currently being opened at the former.

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