BigBearAI (NYSE:BBAI) stock has had a volatile year, with the AI-driven cyber and analytics firm experiencing the full weight of shifting market sentiment.
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The year opened with a sharp rally, as the stock more than doubled within the first few weeks amid broad-based enthusiasm for AI. But momentum faded in the spring when tariff concerns resurfaced, sending the shares into the dumps. There have been ups and downs since then, yet BBAI shares are now up 36% year-to-date.
Against that backdrop, the company’s latest third-quarter earnings report provided a clearer read on where operations stand. The results topped expectations on both revenue and earnings, even though sales fell 20% year-over-year to $33.1 million from $41.5 million in Q3 2024 due to lighter U.S. Army volumes. BigBearAI also boasts a backlog of $376 million, indicating plenty of sales up ahead.
Still, top investor Chris Neigler, who ranks among the top 1% of stock pros tracked by TipRanks, believes the recent strength may not be sustainable.
“This AI stock is on fire – but investors might end up getting burned,” warns Neigler. The investor cites three main reasons why any exuberance regarding BBAI may be misplaced.
First and foremost on his list of concerns is falling revenues. And that’s a problem because young companies riding the surging AI wave are expected to show fast, consistent growth. BBAI isn’t. Its sales have been declining, and not just this quarter. BBAI had already lowered its 2025 revenue guidance to $132.5 million from $170 million, which Neigler calls “a sizeable reduction.” The company also missed its 2024 revenue guidance, the investor reminds.
On the other side of the ledger, BBAI’s profits are worsening. Neigler cites an adjusted loss of $8.5 million, which has more than doubled from a year ago. “With losses expanding, R&D costs rising, and gross margin on the decline, there isn’t much to be positive about for BigBear.ai’s hopes of profitability,” adds Neigler.
And yet, despite falling revenues and worsening margins, BBAI’s share price is trading at a premium. Its price-to-sales ratio is 13x, versus an average of 3.5x for the S&P 500. In other words, plenty of expectations are already priced in.
“BigBear.ai’s stock could fall hard as investors come to grips with disappointing growth,” Neiger sums up. (To watch Chris Neiger’s track record, click here)
As for Wall Street’s view, coverage remains sparse. Just one analyst rates the stock a Buy and one assigns a Hold, giving BBAI a Moderate Buy consensus rating. The 12-month average price target of $6.50 points to a modest 7% upside. (See BBAI stock forecast)
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Disclaimer: The opinions expressed in this article are solely those of the featured investor. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.