Shares of Riskified (NYSE: RSKD) have been clobbered since coming public in August 2021. Shares popped in September, but that quickly faded and now the stock is down more than 71% from its IPO price.
Riskified provides artificial intelligence (AI)-based determinations for e-commerce companies that help them detect fraud -- a service that is extremely valuable for its customers. The company has seen impressive adoption since coming public, but this was overshadowed by concerns about its AI accuracy.
If Riskified permits a fraudulent order for its customer, the company will foot the bill for lost goods. While this makes the company's services extremely valuable for e-commerce businesses, it can hurt Riskified's gross margins if its AI is wrong. The problem? It was wrong a lot in third-quarter 2021, and its gross margin tanked nearly 6.5 percentage points in Q3, convincing investors that its artificial intelligence wasn't all it was cracked up to be.
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This Growth Stock Might Be Down, But It's Not Out