BigBear.ai (BBAI), a provider of artificial intelligence (AI)-powered decision intelligence solutions, has recently scored key contracts from the Department of Defense, helping to send the shares surging up over 165% in the past month. The firm, which specializes in providing solutions for national security, defense, travel, trade, and enterprise, will tackle advancing the Virtual Anticipation Network (VANE) prototype using custom AI models to improve the assessment and analysis of news media from potential U.S. adversaries. It also recently sealed a prime Indefinite Delivery/Indefinite Quantity (IDIQ) contract under the U.S. Department of Navy’s SeaPort Next Generation program. The company expects a significant ramp in revenue, and Wall Street analysts agree, as they’ve upgraded 12-month price targets for the shares. Investors looking for opportunities to invest in the practical application of the AI story might find this an appealing option.
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Rapidly Potential Expansion Courtesy of DoD Contracts
BigBear.ai is a rapidly developing technology company specializing in providing artificial intelligence (AI) decision-making solutions. It uses sophisticated technology like advanced analytics and predictive models to empower clients’ decision-making processes, with services primarily utilized in complex, distributed, mission-based operating environments.
The company’s clientele spans various sectors, including national security, defense, travel, trade, and enterprise. Known for its AI and predictive analysis innovations, BigBear.ai has positioned itself as a reliable partner for organizations navigating intricate operational landscapes.
BigBear.ai has recently announced that it has secured a contract with the Department of Defense (DoD) Chief Digital and Artificial Intelligence Office (CDAO). The agreement aims to advance the Virtual Anticipation Network (VANE) prototype, which was created to provide clarity in multi-domain environments by aggregating and analyzing vast data points. The improved VANE prototype is set to enhance CDAO’s capacity to identify key trends in potential foreign adversarial regions, providing vital insights for national security.
Further, BigBear.ai has been awarded a prime Indefinite Delivery/Indefinite Quantity (IDIQ) contract under the U.S. Department of Navy’s SeaPort Next Generation (SeaPort NxG) program. This program serves as a primary contracting platform for the U.S. Navy, easing the procurement process for various services. This contract enables the company to offer innovative technologies and essential support to the U.S. Navy and other federal agencies. One example is the company’s development of AI for advanced autonomous surface vessels (ASV), digital twins and asset management for shipbuilding, and computer vision for maritime situational awareness.
Notable Growth and Positive Outlook
The company reported third-quarter financial results for 2024 that demonstrated notable growth compared to the same period in 2023. Revenue increased by 22.1% year-over-year, rising from $34.0 million in Q3 2023 to $41.5 million. Gross margin also improved, standing at 25.9% compared to 24.7% the previous year. This increase was partially attributed to the implementation of higher-margin commercial solutions during the period.
However, the period saw a net loss of $12.2 million, compared to a net income of $4.0 million in Q3 2023. This shift towards a loss was primarily driven by a decrease in the benefit from changes in the fair value of warrants. Nevertheless, there was a positive non-GAAP Adjusted EBITDA of $0.9 million, a significant increase from the $0.2 million in Q3 2023, due mainly to improved gross margins and further cost management efforts.
Total expenses increased, with a noted rise in SG&A from $15.5 million in Q3 2023 to $17.5 million in Q3 2024. This was partially due to increased staffing and higher non-recurring costs related to integration, strategic initiatives, and litigation.
As of the quarter’s end, the company reported a backlog of $437 million. Looking ahead, management has provided a financial forecast for the end of the year, projecting revenue between $165 million and $180 million.
Analysts are Constructive
The stock has enjoyed a strong run, climbing over 344% in the past year. It trades at the high end of its 52-week price range of $1.17-$9.70 and demonstrates ongoing positive price momentum as it trades above major moving averages.
Analysts following the company have been constructive on the stock. For instance, Cantor Fitzgerald analyst Yi Fu Lee recently reiterated an Overweight rating on the shares and raised the price target to $8.00 (from $3.50), noting improving execution and recent wins.
BigBear.ai is rated a Moderate Buy overall, based on the recent recommendations of two analysts. The average price target for BBAI stock is $7.50, which represents a potential downside of -12.28% from current levels.
See more BBAI analyst ratings.
Bottom Line on BBAI Stock
BigBear.ai has seen a substantial surge in its shares thanks to some notable contracts from the Department of Defense. The recent earnings report shows solid growth, with a revenue rise of over 22%. Although there was a net loss, there was still a positive non-GAAP Adjusted EBITDA. A significant backlog going into the next quarter and a strong financial forecast point towards continued growth. So, BBAI offers an intriguing opportunity for investors interested in practical AI applications.
