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BigBear.ai Holdings Inc. (BBAI) is an artificial intelligence (AI)-powered data analytics specialist, providing decision intelligence solutions that span national security, digital identity, and supply chain management. The company's list of customers includes national defense and intelligence agencies, as well as transportation security and border security, plus private sector companies from the travel, entertainment, manufacturing, distribution and logistics, and tourism industries. Incorporated in 1988, the company is headquartered in Columbia, Maryland.
Valued at just $423 million, BBAI is a member of the Russell 2000 Index (RUT), a benchmark of small-cap stocks.
BigBear.ai stock is down about 90% from its April 2022 all-time highs, and now trades firmly in penny stock territory. However, the small-cap stock has gained momentum lately thanks to some positive headlines, and is now up 20% over the past five days.
BigBear Wins a Key Contract
Last Wednesday alone, BigBear stock spiked more than 27% after the company announced a new contract with privately held Concept Solutions, establishing BBAI as a subcontractor to the Federal Aviation Authority (FAA).
Under the terms of the deal, worth up to $2.4 billion over the next decade, BBAI will manage information systems nationwide, and provide support for administrative, financial, and security programs to enhance operational and facility management capabilities.
BigBear Falls After Q2 Earnings
The contract win helped reverse a post-earnings slump for BigBear.ai, which announced mixed Q2 results at the beginning of this month.
BBAI posted Q2 revenue of $39.78 million, up 3.4% from last year’s figure of $38.46 million, but short of the expected $46.54 million. The net loss narrowed to $11.7 million, compared to last year's $16.9 million, while the non-GAAP EBITDA loss of $3.4 million translated to a better-than-expected per-share loss of $0.04.
Gross margin increased from 23.3% in last year's Q2 to 27.8% this year. Further, the company ended the quarter with a cash balance of $72.3 million, up 140% from last year’s $29.9 million.
Management decreased its full-year revenue outlook to a range between $165-$180 million from the previous guidance of $195-$215 million, which CEO Mandy Long attributed to uncertainty “around the timing of certain customer awards and regulatory approvals.” BBAI ended the quarter with a backlog of $266 million.
BBAI Scores ‘Strong Buy’ Status
Analysts appear to have grown more bullish on BBAI stock lately, with the consensus rating on Wall Street rising from “Moderate Buy” one month ago to “Strong Buy” today. However, it's worth noting that this is largely the result of one analyst with a “Hold” rating recently dropping their coverage on the penny stock.
Currently, BBAI has 3 “Strong Buy" ratings and 1 “Hold,” compared to 3 “Strong Buys” and 2 “Holds” previously.
The mean price target for BBAI is $3.00, about 80% higher than current prices. Notably, BBAI stock hasn't traded above $3.00 per share since prior to its March 2024 bear gap on Q4 earnings.
While this penny stock may have significant upside potential, the lack of profitability and uneven revenue visibility means that BigBear.ai is a high-risk, high-reward play that's likely best reserved for investors who can stomach the increased volatility.
On the date of publication, Ruchi Gupta did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
