Predicting the future trajectory of BigBear.ai's stock over a decade is a complex task due to numerous unpredictable factors.
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BigBear.ai (BBAI) has seen a rollercoaster ride since its initial public offering (IPO) in December 2021. The AI software company debuted at $9.84 per share after merging with a special purpose acquisition company (SPAC), only to hit an all-time high of $12.69 four months later. However, it plummeted to an all-time low of $0.63 just eight months after reaching that peak in Dec 2022. Today, the stock trades around $3.40.
Investors paused their pessimism, cheering as BBAI showed signs of stabilization under new CEO Mandy Long, previously an executive at IBM. Despite this uptick, the shares are still over 70% below their all-time high, leaving many wondering if this volatility can lead to new record highs within the decade.
What does BigBear.ai do?
BigBear.ai excels in AI-driven data-mining and analytics tools, sourced from various domains. Their services empower clients to make quicker, informed decisions. This is a dense market, but what sets BigBear.ai apart is its offer of stand-alone "observe, orient, and dominate" modules, compatible with existing software infrastructure. Additionally, they specialize in edge networks rather than core networks, providing an appealing alternative to larger cloud-based analytics platforms.
Troubles Ahead: Overpromises and Underperformances
Before heading public, BigBear.ai projected its revenue growth from $182 million in 2021 to $388 million in 2023. However, just like other SPAC-backed AI startups, they delivered less than promised. Revenue stood at $146 million in 2021, up only 6% in 2022, and flatlining at $155 million in 2023.
BigBear.ai explained the slowdown due to macroeconomic headwinds, competition, and the bankruptcy of its major customer, Virgin Orbit. But competitors like Palantir and C3.ai still outpaced BigBear.ai's growth, even in the face of similar headwinds.
With a declining gross margin and steep losses, investors doubted BigBear.ai's capacity to survive the aggressive AI software market.
A New Dawn with CEO Mandy Long
Under Long, BigBear.ai entered into an all-stock acquisition of AI vision-technology developer Pangiam, secured new government contracts, and curtailed spending to improve its adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA). These efforts boosted its near-term revenue, pushing its adjusted EBITDA towards breakeven levels.
Analysts anticipate a 8% growth in revenue to $168 million for 2024, accompanied by a negative adjusted EBITDA of $1 million. By 2025, they expect revenue to reach $193 million with a positive adjusted EBITDA of $5 million.
The market optimists expect that new government contracts, data-sharing agreements with Palantir and Amazon Web Services (AWS), and Pangiam's growth in the AI vision market will fuel BigBear.ai's growth in the coming years.
However, new uncertainties arise with McAleenan replacing Long as BigBear.ai's CEO. Investors are yet to understand if McAleenan will stick to Long's strategies or introduce new ones.
The Future: Unfathomable or Foreseeable?
If CEO Long's plans go as planned, BigBear.ai might attain a $500 million revenue by 2035, triple its current market cap, provided the stock continues to trade at 4 times its trailing sales.
But is this growth dependent on acquisitions, like the Pangiam deal, or organic growth? With an 85% increase in share count since its public launch, further acquisitions would likely dilute investors with all-stock deals.
Moreover, revenue from BigBear.ai's recent deals, such as their $165 million automation contract with the U.S. Army, won't materialize in full for at least 5 years. Many partnerships and demonstrations also lack immediate, substantial revenue-generating potential.
BigBear.ai wraps up its latest quarter with $256 million in liabilities, creating a high debt-to-equity ratio of 2.6. If they fail to grow organically, they may struggle to service their debt without failures.
Overall, BigBear.ai doesn't yet prove a sustainable business model despite its potential in the AI market. With challenges throughout its revenue growth, financial performance, and market competition, setting new record highs within the next 10 years remains uncertain.
Investors might consider diversifying their portfolios by exploring potential opportunities for investing in BigBear.ai, given its unique offerings in AI-driven data-mining and analytics, despite its volatile stock price. However, the company's financial performance, marked by declining gross margins and steep losses, should be closely monitored before making any investment decisions.
New partnerships and potential revenue streams, such as data-sharing agreements with Palantir and Amazon Web Services (AWS), as well as the growth of AI vision-technology developer Pangiam, could significantly impact BigBear.ai's financial prospects. Smart finance strategies, like controlling spending and focusing on improving EBITDA, could also contribute to the company's long-term stability and growth.