BigBear.ai (BBAI 3.29%) It has been an extremely volatile stock since its public debut. The enterprise AI software developer went public on December 8, 2021 after merging with a special purpose acquisition company (SPAC). Its shares opened at $9.84 on the first day, reaching a high of $12.69 on April 13, 2022. But now trading at around $1.50.
Like many other SPAC-backed tech companies, BigBear.ai failed to meet its lofty growth projections. Rising interest rates also crushed its valuations while casting a harsh spotlight on its persistent losses and messy balance sheet.
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But even after this steep decline, BigBear.ai is still a popular stock. RedditThe Wall Street Beats subreddit. Let's look at why some investors are still attracted to it as a meme stock — and if it has any real potential as a growth stock.
What went wrong with BigBear.ai?
BigBear.ai develops data mining and analytics tools that run on edge networks. Its software can aggregate data from a variety of sources to help organizations make faster and more informed decisions. Unlike other large data mining platforms, it provides its services as small modules that can be plugged into its clients' existing networks.
The technology looked promising, and appeared well-poised to benefit from the secular expansion of the edge network, analytics, and AI markets. Unfortunately, he set the bar too high before his public debut and largely missed his predictions.
|
Matric |
2021 |
2022 |
2023 |
|---|---|---|---|
|
Income (estimated) |
$182 million |
$277 million |
$388 million |
|
Income (Actual) |
$146 million |
$155 million |
$155 million |
|
Gross Margin (Estimated) |
40% |
43% |
50% |
|
Gross Margin (Actual) |
23% |
28% |
26% |
Data source: BigBear.ai.
It mainly blamed the slowdown on macro headwinds and the bankruptcy of its major customer Virgin Orbit in 2023. However, it also overestimated its growth potential and competitive challenges. That's why it came as no surprise when its CEO Reggie Brothers resigned in October 2022. That's why its stock fell nearly 90 percent from its all-time high.
Why are investors still interested in BigBear.ai's stock?
BigBear.ai's numbers look disappointing, but some contrarian investors believe it could eventually bounce back for three reasons. First, its new CEO, Mindy Long, is trying to stabilize the business in three ways: She orchestrated an all-stock takeover of AI vision technology firm Pangiam this March to bring her close; Increase period revenue, secure new government contracts, and aggressively reduce costs to optimize your business. These cost-cutting efforts boosted BigBear.ai's adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) in the second half of 2023 and pushed cash flow into positive territory.
For 2024, analysts expect its revenue to grow 28% to $199 million (due to its acquisition of Pingium) as it narrows its adjusted EBITDA loss to $3 million. In 2025, they expect its revenue to grow 13% to $225 million as its adjusted EBITDA turns positive. We should take these estimates with a grain of salt, but they mean it's not off the cliff yet. Based on those expectations, its stock looks 2x this year's sales.
Second, BigBear.ai insiders have been pure buyers. They bought nearly three times as many shares as they sold over the past three months — even as its stock fell nearly 30 percent. After all, more than 10% of BigBear.ai's float was still being shorted as of April 30 — so any positive news could squeeze those bears and push its stock higher.
So, is BigBear.ai a meme stock or a growth stock?
BigBear.ai is getting some attention on Reddit, but I wouldn't call it a meme stock because its business is stabilizing and its prices are pretty low. Its stock price is also not completely disconnected from its valuations like other meme stocks.
But at the same time, I'm reluctant to call it a growth stock because it's relying heavily on the Pangiam acquisition to boost its near-term earnings. We'll need to see how it fares after the acquisition is fully liquidated in 2025 to gauge its long-term growth potential. So for now, some investors may consider BigBear.ai an undervalued growth stock — but it's still a highly speculative bet with many unpredictable challenges.
Liu Sun has no position in any of the stocks mentioned. The Motley Fool has no positions in any of the stocks mentioned. The Motley Fool has a Disclosure Policy.