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Every Tuesday, I write about one of Barchart.com’s Top 100 Stocks to Buy or Bottom 100 Stocks to Buy.
The top 100 feature stocks with the best one-year returns weighted more heavily to more recent activity, while the bottom 100 are stocks that have performed poorly in recent trading.
CXApp (CXAI) is a Palo Alto-based company that operates a software-as-a-service (SaaS) platform that combines customer experience and artificial intelligence to create a workplace experience SuperApp.
On Tuesday, the stock entered the bottom 100 in the 91st position with a weighted alpha of -73.47, while it’s up 238% over the past year.
What’s strange about that is that only one other stock has a positive 52-week gain—Minim (MINM), a creator of communications products, is up 130% but sitting in the 58th spot—suggesting that the volatility of both stocks is off the chart.
Needless to say, neither stock is worth buying if you lack nerves of steel and the ability to endure oodles of potential losses.
That said, CXApp is intriguing. Anything that helps employees save time while making money is a worthy cause. It’s what business is all about–solving problems.
The big question is whether CXApp legitimately does this or is merely leveraging the interest in AI to convince investors it’s not a wannabe in the rapidly accelerating segment of the tech sector.
I’m confident this isn’t a stock for me. However, if you’ve got ice in your veins, its appearance in the bottom 100 suggests there might be some more losses to endure before it heads for double digits.
Here’s why you might put it on your watch list.
The Google Effect
On April 1, the company announced a strategic partnership and development agreement with Google Cloud, sending its shares 151% higher in a single day of trading. Of course, since then, $1.09 of those gains has been given back. Despite the correction in the first few days of April, its shares haven’t traded this high since August 2023, eight months ago.
I’ll be honest. I’d vaguely heard about the company, but with many application software businesses listed on U.S. stock exchanges, I’ve probably mixed it up with some other WX, CX, or whatever characters you want to assign to its business.
The most significant part of the announcement is that CXApp is partnering with Google to develop a generative AI platform. You can’t be a software business and not be into generative AI.
“On the CXAI platform we are developing category-leading horizontal and vertical Generative AI applications,” stated its April 1 press release.
“Google is partnering with us in enabling these applications with many of their new technologies including the Vertex AI platform. We believe these AI-native applications will become the norm for the new knowledge economy and generate transformational employee experiences everywhere.”
Vertex AI essentially provides CXApp with the tools necessary to build AI-native applications for its SuperApp. That’s a good thing. The pay-as-you-use billing model enables smaller businesses such as CXApp to develop a single platform for all machine learning and AI tasks.
The beauty of the partnership is that both parties win: CXApp gets to access the AI resources of one of the world’s biggest companies, while Google Cloud gets more revenue through its work connecting companies to CXApp and vice versa.
This isn’t Google’s first rodeo. It does millions of these agreements and partnerships. It’s a much bigger deal for CXApp if it translates to accelerated growth.
What’s CXApp’s Growth Like?
The last 10-K that the company filed was on March 21, 2023. On March 29, 2024, it notified investors and the SEC that it would file its 10-K late due to a need to review financial statements between January 1, 2023, to March 14, 2023, of its predecessor company, Inpixon, which merged with KINS Technology Group, a SPAC, on March 14, 2023.
The 10-K is expected any day unless it gets another extension from the SEC.
Its last official report was released in November when it released its Q3 2023 financial results.
As I look at the 10-Q, I see that its revenues were $1.77 million, up $28,000 from a year earlier. In comparison, it had an operating loss of $4.23 million, less than half its predecessor company’s operating loss of $9.52 million.
Through the first nine months of 2023 (Sept. 30, 2023), its revenues were $5.65 million, down 13% from a year earlier. Its operating loss through Sept. 30 was $12.78 million, down from $21.93 million a year earlier.
I’m not seeing much growth, although it has reduced its losses through a 56% cut to its operating expenses. Further, it did say in its press release that it grew its remaining performance obligations (RPOs) by double digits on a sequential basis by adding new customers and expanding relationships with existing customers.
One of its new customers in Q3 2023 was a large media business, generating a seven-figure agreement. However, it fails to specify the number of customers it has, etc.
In Q2 2023, it said it had 22 unique enterprise customers in 59 countries, adding four new customers in the second quarter, two of which were Fortune 200.
The Bottom Line
Until it releases its 10-K, even if you’re the most aggressive investor in the world, I would not make a move on CXAI until specific customer and RPO numbers for 2023 relative to 2022 are released.
As it stands now, it needs new debt or equity funding to get through 2024 as a going concern. It could already be out of money.
Without these two things, CXApp is a no-go, in my opinion. However, if it rectifies both, a small wager becomes an interesting bet for the aggressive investor.
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