BigBear.ai (NYSE:BBAI) stock has found itself in the hot seat after releasing a Q2 report that landed well below expectations. Shares rebounded 5% on Friday, but remain down 13% since the release.
Elevate Your Investing Strategy:
- Take advantage of TipRanks Premium at 50% off! Unlock powerful investing tools, advanced data, and expert analyst insights to help you invest with confidence.
That decline reflects the scale of the disappointment. The company not only missed expectations on both the top and bottom line, but it also slashed its full-year revenue forecast from the prior $160–$180 million range to $125–$140 million. That’s a ~22% cut at the midpoint and well below the consensus estimate of $167.74 million. Management even pulled its full-year EBITDA guidance, a move that further rattled investors.
One top investor, known by the pseudonym Deep Value Investing (DVI), wasn’t impressed by the company’s attempts to reframe the outlook. In fact, DVI offered a candid assessment that left little room for optimism.
“To be direct, I don’t see any positive catalysts to consider starting a long position in this stock. I will be even more direct: I have big doubts about their plans to improve the top line by leveraging the tailwinds of the OBBB (One Big, Beautiful Bill) before the end of this year,” says DVI, who is among the top 4% of TipRanks’ stock pros.
That skepticism stems largely from the operating environment. The federal sector’s efficiency push has disrupted important U.S. Army programs, leading BigBear to miss revenue expectations by $10.8 million in Q2. Lowering guidance by 22% at the midpoint suggests these disruptions are not short-term hiccups but issues that could weigh on results through year-end.
“That said,” DVI concedes, “the OBBB could help their ConductorOS and Shipyard AI offerings, but I don’t see much lift for the core biometrics business yet.”
Even so, not everything is bleak. For the first time, BigBear closed a quarter with more cash than debt, boasting $391 million in cash and a net cash balance of about $250 million. Yet, for DVI, this strength is overshadowed by management’s comment that they are “actively pursuing strategic transformational acquisitions.” To the investor, this signals organic growth remains elusive, forcing reliance on deals rather than internal momentum.
Dilution adds another layer of concern. BigBear raised $293 million last quarter through its ATM program by selling 75 million shares at an average price of $3.9. Considering the stock traded in the mid-$8s by mid-July, raising capital at those lower levels makes it look like management lacked conviction in the stock’s upside potential.
Put together, the case for caution outweighs the case for optimism.
“I’d rather stay on the sidelines until I see a set of PRs announcing a hike in government contracts…For now, I see BigBear.ai very far from the growth of Palantir’s US government segment,” DVI summed up, rating BBAI shares a Hold (i.e., Neutral). (To watch Deep Value Investing’s track record, click here)
On Wall Street, the BBAI ratings split into 2 Buys and Holds, each, all coalescing to a Moderate Buy consensus rating. However, the average target leans negative; at $5.88, the figure implies shares will decline by 4% in the months ahead. (See BBAI stock forecast)
To find good ideas for stocks trading at attractive valuations, visit TipRanks’ Best Stocks to Buy, a tool that unites all of TipRanks’ equity insights.
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.