Could BigBear.ai Emerge as the Next Palantir Technologies?

Palantir Technologies has had a remarkable year, showcasing impressive growth and increasing profitability for its shareholders. As of now, its stock has surged by 285% year to date. This rise is driven by widespread optimism that this artificial intelligence (AI) pioneer is still at the beginning of a major global expansion.

While there is much to admire about Palantir, investors may also want to explore other companies in the tech sector that are following a similar path of innovation. BigBear.ai (BBAI -3.93%) is one such small-cap company that is developing a range of AI applications with significant potential.

This raises the question: Could BigBear.ai be the next Palantir? Let’s delve deeper into both companies.

Comparing BigBear.ai and Palantir

BigBear.ai has a market capitalization of $550 million, making it much smaller compared to Palantir's impressive $150 billion valuation. Despite this discrepancy in size, both firms share similarities. They both focus on AI and machine learning software designed for the cloud, helping organizations sift through complex datasets to derive predictive insights. Additionally, BigBear.ai and Palantir have formed a strategic partnership to enhance each other's capabilities.

Innovations like generative AI and workflow automation are reshaping productivity in various industries, resulting in strong demand for such technologies. Here, Palantir has led the way with its comprehensive end-to-end solutions, while BigBear.ai is still in the process of building its presence by targeting specialized niches.

A notable aspect of Palantir's success has been its shift from a traditional focus on government and defense sectors to increasing commercial applications. In its most recent third quarter report (ending September 30), Palantir’s revenues jumped 30% year-over-year, largely due to major enterprise clients adopting its Artificial Intelligence Platform (AIP). This revenue growth has translated into significantly higher earnings, and trends suggest this momentum will continue into 2025 and beyond.

Conversely, BigBear.ai is still awaiting that pivotal growth moment, as a significant part of its revenue comes from a small number of large Department of Defense contracts. In its latest third quarter results, BigBear.ai reported a 22% revenue increase compared to the previous year, although this followed a series of weaker performances in earlier quarters.

Unlike Palantir, BigBear.ai is currently operating at a loss and is not yet profitable, which has affected its stock performance adversely. For BigBear.ai to become the next Palantir, it will need to show stronger growth metrics.

Metric	BigBear.ai 2024 Estimate	Palantir Technologies 2024 Estimate
Revenue	$169 million	$2.8 billion
Revenue change (YOY)	8.6%	25.5%
Earning per share (EPS)	-$0.28	$0.38
Annual EPS change (YOY)	N/A	52%

Data source: Yahoo Finance. YOY = year over year.

BigBear.ai's Leadership in Computer Vision

BigBear.ai distinguishes itself with its early leadership in AI-powered computer vision. Its Pangiam digital identity brand uses biometric technology, real-time images, and video analysis to detect anomalies and enhance security. Several major international airports have adopted products like the TrueFace and veriScan systems, further validating BigBear.ai's innovative approach.

The investment appeal of BigBear.ai lies in its unique AI vision technology, which has the potential to disrupt various industries beyond just transportation and logistics. Its capabilities could enhance healthcare diagnostics, improve agricultural monitoring, streamline retail inventory management, and ensure quality control in manufacturing.

For investors who believe in BigBear.ai's strategy to penetrate new commercial sectors, there are valid reasons to consider investing in the stock today.

Moreover, BigBear.ai shares are currently trading at under four times the full-year revenue estimate from Wall Street analysts, resulting in a low price-to-sales (P/S) ratio. This valuation is a sharp contrast to Palantir's inflated forward sales ratio of 54. While Palantir stock has become quite pricey, BigBear.ai may represent better value and possess greater potential for upside if it exceeds market expectations.

Final Thoughts

The central question for investors is not just whether BigBear.ai can surpass Palantir in value, but whether it can deliver a similar level of remarkable returns. This prospect seems feasible, especially with 2025 being a crucial year for BigBear.ai to showcase its differentiated AI solutions across new commercial landscapes.

Yet, BigBear.ai's current financial instability and weaker fundamentals may keep its share prices under pressure for the time being. For those willing to embrace volatility and with a long-term investment mindset, BigBear.ai could be a valuable addition to a diversified portfolio.

Note: The author has no investment in the mentioned stocks. The article does not endorse any specific companies.

Palantir, Innovation, Investment