Is BigBear.ai Stock a Good Investment Right Now?

Artificial intelligence (AI) stocks have faced significant challenges recently, similar to those affecting the broader stock market. Investors are concerned about the economic outlook, largely driven by uncertainties surrounding President Donald Trump's tariff and trade policies.

This tumultuous environment has also opened the door for investors to consider purchasing shares of potentially promising companies at lower prices. One such company is BigBear.ai (BBAI 7.95%), which offers AI solutions for both government and commercial sectors.

As of mid-March, BigBear.ai’s stock had declined by roughly 27% this year. This sharp drop might present an opportunity for investors to buy in, or it could serve as a warning sign to steer clear of the stock.

BigBear.ai's Market Journey

Although BigBear.ai's stock price has decreased in 2025, it actually appreciated by around 33% over the past year up to March 12, fueled by excitement surrounding AI advancements.

The joint announcement of Project Stargate—a partnership involving Oracle, SoftBank, and OpenAI, which aims to invest $500 billion into AI infrastructure—along with Vice President Vance's remarks in February about the U.S. focus on leading AI developments, contributed to a surge in BigBear.ai share prices, hitting a peak of $10.36 last month.

However, the situation took a downturn in March. While the broader market decline played a role, it was not the only factor influencing BigBear.ai's stock drop.

On March 6, the company released its fourth-quarter earnings report, and immediate reaction from investors was negative. Earlier, in Q3, management had anticipated revenue for 2024 to be between $165 million and $180 million, but the actual revenue came in at only $158.2 million. Given these disappointing results, the stock’s decline was somewhat expected.

Why Consider Investing in BigBear.ai?

Despite missing its revenue forecast, BigBear.ai’s 2024 revenues still surpassed the 2023 figure of $155.2 million, thanks to securing additional government contracts. Furthermore, management is optimistic about 2025 projections, estimating revenues could increase to between $160 million and $180 million.

Should investors trust this new estimate? Management has identified several factors supporting their confidence.

Firstly, BigBear.ai appointed a new CEO, Kevin McAleenan, who took the helm in January and has already made significant changes. Under his leadership, the company has reduced its net debt significantly, from $150 million at the end of Q4 to only $27 million in March.

The firm is concentrating on four primary segments for its AI efforts: border security, defense, intelligence, and critical infrastructure. These areas are likely to attract investment from the U.S. government and other countries, making them appealing markets for BigBear.ai.

Concerns Surrounding BigBear.ai

However, there is a significant risk associated with investing in BigBear.ai: President Trump has instructed his administration to explore cuts to government spending. As most of BigBear.ai’s revenue is generated from federal contracts, any reduction in government spending could drastically impact its sales.

Moreover, such financial setbacks could push BigBear.ai into deeper financial trouble. The company is currently unprofitable, with losses mounting. In 2024, it reported a net loss of $257.1 million, primarily due to changes in its derivatives portfolio, which is over four times the loss of $60.4 million it incurred in 2023.

Another aspect to consider is BigBear.ai’s stock valuation. As the company is not profitable, the most relevant metric to assess is the price-to-sales (P/S) ratio. This ratio provides insight into how much investors are willing to pay for each dollar of revenue generated by the company.

Despite its recent stock price decline, BigBear.ai's P/S ratio remains somewhat high compared to its valuation during much of the previous year.

The uncertainty regarding the company's revenue growth in 2025, particularly in the face of potential federal budget cuts, adds to the complexity of the investment decision. Therefore, it may be wise for potential investors to hold off on purchasing shares of BigBear.ai for the moment and observe the company's performance over the coming quarters.

Note: The information provided here is based on the latest available data and personal insights. Investors should conduct their own research before making any investment decisions.

AI, Stocks, Investment