Artificial intelligence (AI) applications company C3.ai (AI -11.82%) sold off 11.2% through 10:50 a.m. ET this morning after KeyBanc analyst Eric Heath downgraded the stock from sector weight to underweight -- which is to say, from hold to sell.

According to Heath, C3 shares that closed near $40 last night are actually worth closer to $29.

Does C3 cost too much?

Valuation is key to KeyBanc's downgrade today. As Heath points out, even adjusted for cash on hand, C3 stock costs a staggering 13.3 times annual sales, or nearly twice the average valuation of its artificial intelligence peers (7.3 times sales).

Notably, Heath doesn't give a price-to-earnings valuation for C3 stock, valuing the stock strictly on its sales. And the reason for that is that C3 has no earnings on which to value it. Worse, C3 isn't expected to turn profitable anytime soon, according to most analysts who follow the stock.

Valuation isn't his only concern, either. Heath also warns that consensus forecasts for C3's sales in fiscal 2026 and 2027 "may be too high considering subscription revenue growth excluding upfront license has moderated to -1% [year over year] in [the fiscal second quarter]."

Is C3 stock a sell?

Translation: C3's subscription revenue is going down, not up, which seems suboptimal for a supposed growth stock. Combined with continued losses, and concerns that a recent contract expansion with Microsoft may not be all it's cracked up to be (concerns that I share, by the way), KeyBanc simply doesn't think C3 stock is worth what investors are paying for it.

Between the company's long history of losses and analyst forecasts for more of the same as far out as analysts are even making forecasts I suspect the investors who are selling off C3 stock today are making the right call: C3.ai stock is a sell.