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.
BigBear.ai’s stock struggles despite recovery efforts under new leadership
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’s business model and challenges
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.
Recent developments and future projections
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.
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Featured image credit: Bigbear.ai
