C3.ai's (AI) business needs several more quarters to stabilize, even as the company's ability to convert federal bookings to revenues over the next 12 months looks "incrementally better," UBS Securities said.

The investment firm said in a Sunday note that converting about $39 million of fiscal Q1 federal bookings, versus $16 million for the same period last year, to revenues supports a return to positive growth in Q3, adding that it does not see much room for multiple to re-rate higher in the near term.

Fiscal Q1 bookings should drive $5 million to $6 million in quarter-on-quarter revenue growth for the upcoming October quarter, and multiple quarters of $3 million to $4 million of quarter-on-quarter growth in revenues are needed to restore investor confidence, the note said.

UBS has a neutral rating and a $12 price target on the stock.

The company's shares were up nearly 3% in Monday afternoon trading.

Price: 11.87, Change: +0.34, Percent Change: +2.91