BigBear.ai (NYSE:BBAI) shares have skyrocketed 93% so far this year, showcasing the hefty gains AI-driven companies can deliver in this red-hot sector. And no surprise – with the potential AI market expanding to $1 trillion in the early 2030s, investor excitement remains high.
Discover the Best Stocks and Maximize Your Portfolio:
- See what stocks are receiving strong buy ratings from top-rated analysts.
- Filter, analyze, and streamline your search for investment opportunities with TipRanks’ Stock Screener.
Specializing in AI-powered decision-making solutions, BigBear.ai has carved out a lucrative niche, with a significant portion of its business coming from the U.S. defense sector. This strong government backing has drawn comparisons to another big AI winner of late: Palantir.
While acknowledging the obvious parallels between the two companies, investor Oliver Rodzianko thinks BBAI still has a way to go before the comparison is warranted.
“Palantir is a competitor which dominates the market, leaving BigBear.ai investors with a low chance of outsized growth and intangible value over time,” asserts the 5-star investor. In other words, think NVIDIA vs. AMD.
Rodzianko adds that Palantir enjoys $2.9 billion in total revenue, which corresponds with a market share of close to 1.43%. This is significantly higher than BBAI’s revenues of $155 million, which comprises some 0.0775% of the market.
According to the investor, BBAI’s relatively young age is another weight dragging it downwards, as it is relying heavily on equity financing and stock compensation, meaning that dilution is in the cards.
“The biggest drawback for investors is arguably the company’s nascent stage of development,” notes Rodzianko, adding that its weighted average of shares on the market almost doubled from 107 million to 210.2 million over the past three years.
However, there’s one area where BigBear.ai does have an edge over Palantir: valuation. While Palantir trades at a sky-high ~90x price-to-sales ratio, BigBear.ai looks like a relative bargain at ~9x.
For the investor, this is not sufficient to justify buying in at present, especially after the recent uptick in share prices. Rodzianko expects market saturation from new players even as the existing leaders work to consolidate their positions in this growing field.
“BigBear.ai may be a fantastic company, but BigBear.ai stock is a poor investment at this time,” cautions Rodzianko, who rates BBAI shares a Hold (i.e. Neutral). (To view Rodzianko’s track record, click here)
On Wall Street, the stock remains relatively under the radar, with only two recent analyst reviews. Both rate it as a Buy, giving it a Moderate Buy consensus. However, after this year’s massive rally, analysts anticipate a 13% downside in the coming months, based on a $7.50 average price target. It will be interesting to see whether the analysts downgrade their ratings or upgrade price targets over the coming months. (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.
