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BigBear.ai shares have already earned 52-week highs from earlier this year.
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AI software platform providers’ reliance on government contracts is a headwind.
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10 Better Stocks than Bigbear ›
bigbear.ai' (NYSE: BBAI) The stock has been in turmoil in the market so far in 2025, but as of this writing, it still manages to achieve an impressive 57% return. It is worth noting that the stock is down 28.5% from the 52-week height it reached in mid-February. For a comparative company Palantir Technology Due to their very similar business model, investors may now wonder if it is possible to view ai stock slides as a buying opportunity.
Let's take a closer look at what BigBear.ai has done and check whether its outlook and valuation are worth buying after its share price falls.
Image source: Getty Images.
Just like Palantir, BigBear.ai is also engaged in the business of providing customers with artificial intelligence (AI) software solutions so that they can increase operational efficiency and increase productivity. It offers a variety of tools related to data analytics, cybersecurity, enterprise IT solutions, digital twins and digital identities.
Good thing is that demand for these AI software solutions is expected to grow rapidly. IDC predicts that the AI software platform market will have revenue of up to US$153 million in 2028 and up to US$27.9 billion in 2023. The bad part is that BigBear.ai is unable to take full advantage of this rapid development opportunity.
The company's recent results clearly show that it lacks AI software opportunities. Its revenue fell 18% year-on-year to $32.5 million. Gross margins have also shrunk, which explains why the amount of gains from its adjusted interest, tax, depreciation and amortization (EBITDA) losses have more than doubled to $8.5 million.
Of course, BigBear.ai reported a $380 million revenue backlog at the end of the second quarter, up 43% from the previous year – but there are a lot of warnings. The main concern of BigBear.ai is that it earns most of its revenue from government contracts. This may explain why most of the revenue backlog lists have no source of funds, or whether it is to rely on customer discretion to purchase services.
Only 4% of BigBear.ai’s backlog is funded, which refers to the residual value of existing contracts that have not yet been fulfilled. The rest of the backlog is either without funds or without attitude. Therefore, despite a healthy backlog, BigBear.ai has no visible revenue. Throwing BigBear.ai has reduced its full-year revenue forecast by 19%, and unless its wealth changes substantially, there is a high chance that the stock will be under pressure.
The story continues
OK, there are some silver linings lately. Recently, the stock jumped to the news that it will support the U.S. Navy in its maritime practice, which has led investors to hope it can win more business. Additionally, BigBear.ai’s enhanced passenger processing (EPP) solution has been deployed at Nashville International Airport.
However, it remains to be seen whether these developments will have a positive impact on the company's financial performance.
BigBear.ai's median is $6 for 12-month stock price target, with a potential decline of 7% down 7%. This is not surprising, as the company's growth is estimated to have taken a big hit.
YCHARTS data.
Also, bigbear.ai stock is not completely cheap right now. It is sold at 12 times the price. Much higher than Nasdaq Composite Materials Index has a price-to-sale ratio of 5. Based on the company's sales, sales will drop by double digits this year, and its wealthy valuation is unreasonable. All of this tells us that even after the recent pullback, this AI stock is not worth buying, which is why investors are good at scrutinizing other names that are adjusting for healthy growth and trading at attractive valuations.
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The harsh Qiao Han has no position in any of the stocks mentioned. Motley Fool has a place and recommends Palantir Technologies. Motley Fool has a disclosure policy.
Down 34%, should you buy dipping sauce on bigbear.ai stock? Originally published by Motley Fool