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Since OpenAI-led ChatGPT gained public prominence in late 2022, the rally of artificial intelligence (AI) stocks has been unstoppable. Whether it’s chipmakers like Nvidia (NVDA) or Advanced Micro Devices (AMD), hyperscalers like Microsoft (MSFT), Amazon (AMZN), Meta Platforms (META), or Alphabet) (GOOGL), or chip manufacturers like Taiwan Semi (TSM), stocks in the AI industry have rewarded investors handsomely over the last couple of years.
However, as is the case with any industry witnessing a massive rally, some hidden gems do not get as much time in the spotlight as others. Moreover, as investors continue to flock to the industry’s most popular names, they might miss an opportunity to witness even larger gains by seeking out these smaller companies.
There is one such name in the AI realm that had a stellar 2024, and analysts now believe its upside journey will continue unabated in 2025 as well.
About BigBear.ai Stock
Founded in 2008, BigBear.ai (BBAI) is a technology-driven company specializing in AI and machine learning (ML) solutions, primarily serving the defense, intelligence, and commercial sectors. BigBear.ai offers AI-powered analytics and cyber engineering solutions designed to support decision-making processes in complex environments. Its market capitalization currently stands at $1.11 billion.
In 2024, BBAI stock went up by an impressive 124%.
Now, what is making analysts so bullish about this penny stock from the AI sector? Let’s have a closer look.
Strategic Moves Holds It in Good Stead
BigBear.ai leverages its expertise in analyzing complex data sets to predict actions and support decision-making, which has established it as a trusted partner to the U.S. intelligence community and other federal agencies. Among its offerings, the ConductorOS platform stands out, enabling clients such as the Department of Defense to integrate AI across diverse data sources for improved situational awareness. A testament to its capabilities is the company’s five-year, $165 million contract with the U.S. Army to provide an AI-powered platform for data automation and management, showcasing its growing footprint in the defense sector.
The acquisition of Pangiam Intermediate further enhances BigBear.ai’s portfolio, adding advanced facial recognition and biometric capabilities to its computer vision tools. Pangiam’s imaging technology, integrated with advanced computed tomography (CT) baggage screening systems, displays 3D images of bag contents, akin to how medical CT scans probe the human body. This capability extends beyond the travel industry into supply chain and logistics optimization, addressing a critical challenge: false alarms triggered by tomography. Using machine learning trained on extensive test data, Pangiam’s technology reduces false positives, thereby increasing the accuracy and efficiency of automated scanning systems.
Moreover, BigBear.ai’s strategic partnership with its larger competitor, Palantir (PLTR), is a notable advantage. While both companies process data, their collaboration highlights complementary strengths: Palantir develops enterprise data platforms, while BigBear.ai delivers actionable insights from those platforms. This collaboration not only reduces marketing overhead but also creates opportunities to secure more contracts in an environment where demand for AI solutions is surging.
By combining innovative AI platforms, strategic acquisitions, and partnerships, BigBear.ai is positioning itself as a significant player in the expanding AI defense market. Its advanced technologies, federal government ties, and ability to optimize AI applications for diverse sectors provide a strong foundation for long-term growth.
Improving Financials
One valid criticism of BigBear.ai is that its financial performance has been shaky, marked by unprofitability.
Yet, the results for the latest quarter saw a year-over-year revenue increase along with losses coming in narrower than consensus estimates. In the third quarter, the company reported revenue of $41.5 million, denoting growth of 22.1%. Encouragingly, the gross margins also improved to 25.9% from 24.7% in the year-ago period. Increasing revenues and improving gross margins are a sign of rising competitive strength which bodes well for the company in the long run.
Losses per share for the quarter stood at $0.05 compared to an EPS of $0.03 in the same quarter last year.
In terms of cash levels, BigBear.ai more than doubled its coffers to $65.6 million from $32.6 million at the start of 2024. Although the long-term debt levels of $195.7 million were much higher, the company had no short-term debt on its books. Thus, the company is under no liquidity strain, at least for the short term.
What Do Analysts Think About BBAI Stock?
Analysts have deemed the stock a “Strong Buy” with a mean target price that has already been surpassed and a high target price of $7 which denotes upside potential of about 57.3% from current levels. Out of 4 analysts covering the stock, 3 have a “Strong Buy” rating and 1 has a “Hold” rating.
