Finance

BigBear.ai: Will This Artificial Intelligence Stock Soar Again?


Artificial Intelligence (AI) and Data Companies big bear.ai (NYSE:BBAI) Over the past month, artificial intelligence hype and news from the leader in AI chips have sent stock prices soaring. Nvidia is buying stakes in emerging artificial intelligence companies (it did not buy a stake in BigBear.ai).

Unfortunately, those gains evaporated after an earnings report missed Wall Street expectations. That leaves investors at a crossroads, trying to decide whether BigBear.ai’s rise was just a fluke or if the stock should rebound.

While no one knows for sure, there is evidence that investors should remain cautious. This is why BigBear.ai may have a hard time resurrecting.

First, what does BigBear.ai do?

It’s common for hot topics on Wall Street to become buzzwords. AI. are enjoying this level of hype, so understanding what these companies actually do is crucial in deciding which stocks to invest in. BigBear.ai is a data analytics company that uses artificial intelligence to enhance organizational decision-making.

Its primary focus areas include chain supply management, cybersecurity, autonomous systems, and government and military operations. The company has worked with the U.S. Department of Defense, Army and Navy. Overall, BigBear.ai defines the government’s contribution to its revenue as “That’s not necessarily a bad thing; the government is a great customer, especially military-related business, which is a top priority for the federal budget.

Importantly, the service BigBear.ai offers is not unique; its competitors include Palantir and C3.aiBoth are larger than BigBear.ai, which has a market capitalization of $480 million as of this writing.

debt problem

When you’re a small company in a cutthroat field like enterprise software, you have to stay lean and mean. It’s no coincidence that Palantir and C3.ai have zero debt and plenty of cash to help them invest in growth. , BigBear.ai The company is saddled with $195 million in long-term debt, dwarfed by its $32 million cash hoard.

BBAI Cash and Short-Term Investments (Quarterly) Chart

BBAI Cash and Short-Term Investments (Quarterly) Chart

The company isn’t yet profitable, but its cash burn is improving. The company reported negative $22 million in free cash flow in 2023, but that number had shrunk to just negative $1 million by the fourth quarter. That should stem the financial bleeding, but it still limits the company from investing significantly in the business.

Can BigBear.ai compete in the long term?

BigBear.ai has no chance of outspending its competitors, so its technology must be good enough to win business. Recently acquired Pangiam, a company specializing in facial recognition and image analysis. As mentioned earlier, it is winning contracts, especially with the military.

Management also guided for solid growth this year, with revenue reaching $195 million to $215 million in 2024 as the company integrates Pangiam. This is a whopping 39% growth from 2023. However, revenue is flat from 2022 to 2023, so a Pangiam acquisition is a foregone conclusion?

At the very least, BigBear.ai is a highly speculative stock that requires investors to have faith in its technology, as there isn’t much of a track record to draw from.

Meanwhile, companies like Palantir are well-funded and profitable. Does Palantir have as much upside given its larger market cap? Probably not, but investing is as much about avoiding losses as it is about chasing gains, and BigBear does the same. AI will eventually be lucky to scale to companies like Palantir. Investors would be wise to avoid BigBear.ai and instead opt for artificial intelligence businesses that are already in practice.

Should you invest $1,000 in BigBear.ai right now?

Before buying BigBear.ai stock, consider the following factors:

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Justin Pope The Motley Fool has no position in any of the stocks mentioned. The Motley Fool owns and recommends Nvidia and Palantir Technologies. The Motley Fool recommends C3.ai. Motley Fool has disclosure policy.

BigBear.ai: Will This Artificial Intelligence Stock Soar Again? Originally published by The Motley Fool



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