BigBear.ai's Stock Surges Amid Trump's AI Executive Order and Leadership Changes

Why BigBear.ai Stock Jumped This Week | The Motley Fool

BigBear.ai (BBAI -2.13%) stock posted big gains across the last week of trading. The software company's share price closed out the stretch up 5.4%, according to data from S&P Global Market Intelligence. Meanwhile, the S&P 500 index gained 1.7%, and the Nasdaq Composite index climbed 1.6%. In addition to bullish momentum for the broader market, BigBear.ai stock posted gains in conjunction with moves made by President Trump. In his first week back in office, Trump rescinded a Biden-era executive order on artificial intelligence (AI) and issued his own order for the technology category. President Trump's inauguration was held on Jan. 20, and the new president kicked off his new term in office by rescinding an executive order enacted during the Biden administration governing the progression of AI. By canceling Biden's executive order on AI, Trump removed the need for private companies to report details about AI development to the federal government. Revoking the order also eliminated the need for private companies to ensure their AI initiatives were in line with a series of other guidelines outlined during the Biden administration. Trump followed up the move on Thursday by issuing his own executive order on AI, which the president said was intended to remove barriers to domestic AI innovation. The order has formed an advisory group that will put forth an AI action plan within 180 days. As part of Trump's new order, "all policies, directives, regulations, orders, and other actions taken" regarding AI under the Biden administration will also be reviewed. Investors broadly see Trump's approach as creating a more favorable growth backdrop for AI, and it helped power significant gains for BigBear.ai stock this week. On the other hand, the company's share price did see a pullback later in the week in conjunction with fluctuations in the broader market and insider selling disclosures. Shares had been up as much as 17.1% from the previous week's market close, but gains moderated due to these factors. BigBear.ai recently named Kevin McAleenan its new CEO. Some investors are hoping his experience with the previous Trump administration and working with U.S. national security agencies will help the company land more contracts. BigBear.ai's management had previously noted that it was seeing some hesitance from government customers when it came to AI spending. It's possible that new leadership will strengthen the company's ability to land deals with key public sector customers. But the stock is also up 123% over the last year and is looking riskier on the heels of those gains.

Where BigBear.ai stock could land over the next decade

BigBear.ai (BBAI) has faced significant challenges since its public debut on December 8, 2021, via a merger with a special purpose acquisition company (SPAC), initially opening at $9.84 per share. Although the stock peaked at $12.69 on April 13, 2022, it subsequently fell to a low of $0.63 by December 29 of the same year. Currently, BigBear.ai's stock trades at approximately $3.40. The share price has seen a recovery due to the company's stabilization efforts under CEO Mandy Long, who took over in October 2022. An investment of $1,000 at the stock's record low would have grown to nearly $5,400 over two years, yet it remains over 70% below its all-time high. BigBear.ai climbs 22%: Can McAleenan's leadership fuel the stock even more? BigBear.ai specializes in AI-powered data-mining and analytics tools designed to facilitate faster and more informed decision-making for its clients. The company distinguishes itself with its "observe, orient, and dominate" modules, which integrate easily into existing software infrastructures and are developed for edge networks instead of core networks, contrasting with traditional cloud-based analytics services. However, BigBear.ai has struggled to meet its initial revenue projections, aiming for a rise from $182 million in 2021 to $388 million in 2023. The company reported only $146 million in revenue in 2021, with a modest growth of 6% in 2022 and stagnation at $155 million in 2023. Contributing factors to this slowdown included macroeconomic challenges, increased competition, and the bankruptcy of its significant client, Virgin Orbit, in 2023. Comparatively, competitors like Palantir and C3.ai managed faster growth despite similar market pressures. Under Mandy Long, BigBear.ai acquired AI vision-technology developer Pangiam and secured new government contracts while implementing spending cuts aimed at improving its adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA). These actions have positively impacted revenue projections and nudged adjusted EBITDA toward break-even levels. For 2024, analysts predict an 8% revenue increase to $168 million with a negative adjusted EBITDA of $1 million. Expected revenue growth for 2025 is around 14%, reaching $193 million with a projected positive adjusted EBITDA of $5 million. Bulls in the market anticipate that BigBear.ai's government contracts, partnerships with Palantir and Amazon Web Services (AWS), and Pangiam's growth will drive expansion over the next several years. The company has also improved its financial standing by refinancing $182 million of its convertible notes due in 2026 with new notes maturing in 2029. Can BigBear.ai's stock balance growth and losses to hit $7? Despite these improvements, uncertainties persist, particularly with the recent leadership change as Pangiam's founder, Kevin McAleenan, has succeeded Mandy Long as CEO. It remains to be seen if McAleenan will continue Long's initiatives or implement new strategies. If BigBear.ai meets Wall Street's expectations through 2025 and sustains a compound annual growth rate (CAGR) of 10% for the following decade, it could achieve $500 million in revenue by 2035, potentially leading to a valuation of $2 billion based on a multiple of four times its trailing sales. However, much of the recent growth is linked to the Pangiam acquisition rather than organic development of its core business. Should additional acquisitions be necessary, it may lead to further dilution for investors, as the company has already increased its share count by 85% since going public. BigBear.ai's key government contract amounting to $165 million with the U.S. Army is distributed over the next five years, and other partnerships have not yet produced significant revenue. The company's latest quarter report showed total liabilities of $256 million and a high debt-to-equity ratio of 2.6, raising concerns about its ability to manage debt obligations without organic revenue growth. Disclaimer: The content of this article is for informational purposes only and should not be construed as investment advice. We do not endorse any specific investment strategies or make recommendations regarding the purchase or sale of any securities.

Where Will BigBear.ai Stock Be in 10 Years? | The Motley Fool

This little AI software company still faces big long-term challenges. BigBear.ai (BBAI -5.54%) has disappointed a lot of investors since its public debut. The artificial intelligence (AI) software company went public by merging with a special purpose acquisition company (SPAC) on Dec. 8, 2021, and its stock opened at $9.84 per share. It then rallied to a record high of $12.69 on April 13, 2022, but it eventually sank to an all-time low of $0.63 just eight months later on Dec. 29. The bulls retreated as it missed its own growth targets and racked up steep losses. But today, BigBear.ai's stock trades at about $3.40. Its shares bounced back as investors applauded its gradual stabilization under CEO Mandy Long, a former IBM executive who took the helm in October 2022. A $1,000 investment in BigBear.ai's stock at its record low would have blossomed to nearly $5,400 in just two years, yet it remains more than 70% below its all-time high at the time of this writing. Could this volatile stock rally and set new record highs over the next 10 years? BigBear.ai develops AI-powered data-mining and analytics tools from a wide range of sources. These tools help its clients make faster and more informed decisions. That's a crowded market, but BigBear.ai differentiates itself from its competitors in two ways. First, it provides its services as stand-alone "observe, orient, and dominate" modules, which can be plugged into an organization's existing software infrastructure. Second, it develops its modules for edge networks instead of core networks. That flexibility makes it an appealing alternative to larger and stickier cloud-based analytics platforms. Before it went public, BigBear.ai predicted its revenue would rise from $182 million in 2021 to $388 million in 2023. But like many other SPAC-backed AI start-ups, it overpromised and underdelivered. It only generated $146 million in revenue in 2021, and that figure only grew 6% in 2022 and flatlined at $155 million in 2023. It mainly attributed that slowdown to the macro headwinds, competition, and the bankruptcy of its major customer, Virgin Orbit, in 2023. However, many other larger AI software companies -- like Palantir and C3.ai -- still grew at a faster rate than BigBear.ai even as they faced similar macro and competitive headwinds. That slowdown, along with its crumbling gross margin and steep losses, convinced many investors that BigBear.ai simply wasn't strong enough to survive the cutthroat AI software market. Under Long, BigBear.ai bought the AI vision-technology developer Pangiam in an all-stock deal, signed new government contracts, and reined in its spending to improve its adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA). Those efforts boosted its near-term revenue and drove its adjusted EBITDA toward break-even levels. For 2024, analysts expect its revenue to rise 8% to $168 million with a negative adjusted EBITDA of $1 million. For 2025, they expect its revenue to grow 14% to $193 million with a positive adjusted EBITDA of $5 million. The bulls expect BigBear.ai's new government deals, data-sharing partnerships with Palantir and Amazon Web Services (AWS), and the growth of Pangiam in the AI vision market to fuel its growth over the next few years. It also recently stabilized its balance sheet by swapping out $182 million of its convertible notes, which were due in 2026, for new notes (at the same 6% rate), which mature in 2029. But there are still some uncertainties regarding its future. Pangiam's founder, Kevin McAleenan, recently succeeded Long as BigBear.ai's new CEO, and it's unclear if McAleenan will continue Long's strategies or introduce new ones. If BigBear.ai can meet Wall Street's expectations through 2025 and then grow its revenue at a steady compound annual growth rate (CAGR) of 10% over the following 10 years, it could generate $500 million in revenue by 2035. Assuming it still trades at 4 times its trailing sales, it would be worth $2 billion -- which would be more than double its current market cap of nearly $800 million -- by the end of 2035. Yet a lot of its recent growth was driven by its acquisition of Pangiam instead of the organic growth of its core business. If it needs to make more acquisitions to stay afloat, it will likely dilute its investors with more all-stock deals. It's already increased its share count by 85% since its public debut. Moreover, BigBear.ai's recent deals might not generate as much revenue as investors expect. Its biggest government deal, a new $165 million automation contract with the U.S. Army, is actually spread out over the next five years. Many of its other partnerships, data-sharing deals, and demonstrations aren't generating any meaningful revenue yet. BigBear.ai ended its latest quarter with $256 million in total liabilities, which gives it a high debt-to-equity ratio of 2.6. It's punted a lot of that debt to 2029, but it could struggle to make those payments if it fails to keep growing organically. BigBear.ai might still be around in 10 years, but it hasn't proven its business model is sustainable yet. So for now, I'm still bearish on its future, and I don't expect its stock to set new all-time highs within the next decade.

BigBear.ai: Honey or a Hornet's Nest? An Options Strategy. | The Motley Fool

Artificial intelligence (AI) represents one of the most transformative technological shifts in modern history. BigBear.ai (BBAI -5.54%) has capitalized on this revolution through its AI-powered analytics solutions, driving its shares up 136% over the past six months. Recent government contract wins and strengthening financial performance have attracted significant investor interest in this emerging player. Let's examine whether the stock remains a buy at current levels or if investors should consider alternative strategies to gain exposure to this top AI stock. On Jan. 15, BigBear.ai appointed Kevin McAleenan as chief executive officer. McAleenan, who had been serving as the company's president, stepped into the CEO role, bringing extensive experience from both the government and private sectors, including his previous position as acting secretary of the U.S. Department of Homeland Security. McAleenan's background includes co-founding Pangiam, which BigBear acquired in 2024, and nearly two decades of government service, including his role as commissioner of U.S. Customs and Border Protection. His unique combination of entrepreneurial success and deep understanding of national security priorities positions the company to expand its presence in the defense and security markets. BigBear.ai delivered strong revenue growth of 22.1% year over year in the third quarter of 2024, reaching $41.5 million. The company also improved its gross margin to 25.9%, up from 24.7% in the prior year, benefiting from an increased mix of commercial solutions and improved operational efficiency. The quarter still resulted in a net loss of $12.2 million, compared with net income of $4 million in Q3 2023, primarily attributed to non-cash warrant valuation changes. Despite that, the company achieved positive adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) of $0.9 million and maintained a robust backlog of $437 million, supporting future revenue projections. BigBear.ai recently strengthened its government sector momentum with two significant contract wins. The company secured a five-year, $165 million sole-source prime contract with the U.S. Army to deliver advanced force management solutions powered by AI analytics, strengthening its position in defense technology. In addition, BigBear.ai was awarded a subcontract through Concept Solutions under the Federal Aviation Administration's (FAA) Information Technology Innovative Procurement Strategic Sourcing program. This 10-year, multiple-award indefinite delivery/indefinite quantity contract has a shared ceiling of $2.4 billion across 14 companies and will enable the FAA to acquire a full range of IT capabilities and solutions. Despite recent positive developments, the stock's valuation at 5.3 times trailing sales warrants careful consideration, especially since the company's peer group trades at an average of 3.5 times trailing sales. Therefore, investors seeking exposure to BigBear.ai with defined risk might consider a cash-secured put strategy as an alternative to purchasing shares directly. As an example, using the Jan. 17 options pricing, an investor could sell a January 2026 put option with a $3 strike price. That trade would generate approximately $1.10 per share, or $110 per contract, in premium income before fees. This strategy offers a potential 37% return over the next 12 months if the stock remains above $3, but it's important to remember that you are obligated to buy 100 shares per contract at the $3 strike price if the option is exercised (i.e., if the stock price falls below $3 at expiration). While this premium can help offset any losses if the stock declines, it will limit any gains in exchange for this downside protection should shares rally significantly higher. BigBear.ai's blend of experienced leadership, improving financials, and expanding government contracts paints a promising picture. However, after the stock's recent surge, a cash-secured put strategy offers a calculated approach to this volatile AI player. This strategy allows investors to collect a hefty premium while potentially defining their risk, which is a prudent move in a market that can quickly turn from honey to a hornet's nest. While the upside is capped, the income cushions against potential declines, making it a strategic alternative to buying shares outright.

BigBear.ai vs. C3.ai: Wall Street Thinks One of These Palantir-Like Stocks Could Soar as Much as 108% but Several Analysts Say Sell the Other | The Motley Fool

High-flying artificial intelligence (AI) stocks have taken the market by storm, soaring to stratospheric valuations. Many investors think the party will continue considering the potential of AI and the growing market size. Very few have benefited more than Palantir Technologies, a software platform that allows its users to leverage AI to analyze data and vastly optimize businesses and other organizations. Numerous U.S. intelligence agencies use Palantir's platform in their counterterrorism efforts and the stock rose a whopping 340% in 2024. Given Palantir's success, investors have been on the hunt for similar, lesser-known companies operating in the same space and perhaps with the same appeal. Two they have found are BigBear.ai (BBAI -5.54%) and C3.ai (AI -0.93%), which as a result have experienced plenty of volatility over the past year. Wall Street analysts are keeping a close eye on both AI stocks and think one can soar by as much as 108%, while several analysts are telling investors to sell the other. BigBear.ai describes itself as a leading provider of AI-powered decision making. Earlier in 2024, the company acquired Pangiam, a company that specializes in AI for global trade, travel, and digital identification. The company focuses on three markets, including national security, supply chain, and digital identification. In government, BigBear.ai's solutions offer predictive and forecasting capabilities useful for managing risk, overseeing the transport of goods and people in difficult environments, event prediction, and facilitating relationships between vendors and suppliers. In supply chain, BigBear.ai's capabilities help companies map out capital investment, building design, equipment purchases, and more. Pangiam brings AI-powered facial recognition capabilities for a variety of industries. Through the first nine months of 2024, BigBear.ai generated roughly $114.5 million in revenue, which is comparable to the same period in 2023. BigBear.ai also generated much higher losses so far in 2024, largely due to a onetime $85 million goodwill impairment charge. The majority of the company's revenue comes from government contracts. Four analysts have issued research reports on the stock over the last several months, according to TipRanks. Three analysts rate the stock as a buy and one says hold. The average price target of $4.33 implies about 28% upside from current levels. However, the highest price target of $7 implies 108% upside. H.C. Wainwright analyst Scott Buck recently issued this report, citing increasing demand for the company's products and the exchange and extension of a senior convertible note, removing near-term dilution risk. Buck also believes pure-play AI companies deserve higher valuations. BigBear.ai is not yet profitable and trades at a forward price-to-sales ratio of roughly 4.4, which isn't demanding for a company in the AI business. However, investors seem worried about the balance sheet and wonder whether the company will eventually need to raise more capital and dilute shareholders. Moreover, the lack of revenue growth is concerning, given that the company is trying to position itself as a growth stock. BigBear.ai certainly has potential, but it probably makes sense to start with a small position until more revenue growth materializes. On Wall Street, seeing a sell rating is rarer than you might think. Analysts might work for a bank trying to do business with a company the analyst is covering, so they usually try to avoid sell ratings if they can. Institutional investors and traders know this and you'll often see an analyst that is pessimistic on a company downgrade or maintain a hold rating but then lower their price target. Seeing a sell rating should be a red flag for investors, which makes it more concerning to see four of the 10 analysts that have issued research reports in recent months telling investors to sell C3.ai, according to TipRanks. C3.ai has built a platform that makes it easier for companies to develop enterprise AI solutions. C3.ai's platform enables data integration and management services, AI app development, security services, and an AI studio for developing apps without a lot of coding. The company claims it can help businesses streamline processes and unlock hundreds of millions or even billions of sustained value. In November, the company announced a partnership with Microsoft's Azure platform, where its C3.ai platform will be available to commercial clients. In its most recent quarter, C3.ai grew revenue 29%, its highest growth rate over the last two years. Revenue through the first six months of C3.ai's current fiscal year is up nearly 24% from the same period a year ago. However, losses over this period have only narrowed by about 4%. The company has also yet to incur any debt. While there are four sell ratings on the stock, the average price target implies nearly 18% upside from current levels. The high price target of $55 implies over 73% upside. In late December, KeyBanc analyst Eric Heath downgraded the company to an underweight rating and $29 price target, citing concerns with the company's valuation and earnings estimates that looked too high. Heath doesn't believe the company warranted a price-to-sales ratio of 13.3 (at the time of the report) when the company is only growing revenue between 10%-20%, leading to a bad risk-reward proposition. Analysts at JPMorgan Chase also downgraded C3.ai to underweight, citing the company's "subpar growth-plus-margin performance." In some ways, C3.ai is better positioned than BigBear.ai when you look at recent revenue growth and balance sheet trends, but it also trades at a much higher valuation. Still, the company at least deserves a spot on your watch list.