Are you considering wagering a large sum of money on BigBear.ai Corporation ( BBAI 28.95% ) ? Slow down. The fluctuations in BigBear.ai’s stock price might be more related to overall changes in sentiment toward artificial intelligence (AI) than to any particular events related to the company itself.
Furthermore, closely examining BigBear.ai’s recent financial results might not inspire confidence in investing $100,000 in their stock (assuming you have that amount available without needing it for anything else in the near future). In fact, such a substantial investment would probably be better placed in a company that relies less on hype and optimism, and more on tangible profits.
Monitoring the growing enthusiasm for AI
Technology stocks had a tough time in 2022, but 2023 began with a surge of excitement, driven by ChatGPT sparking widespread interest in artificial intelligence.
Whether by chance or intentional planning, BigBear.ai had “AI” in its name just as the generative AI trend began. In early 2023, BigBear.ai’s stock surged from $0.76 to over $5 per share. The company assists clients in analyzing data and making informed decisions.
Regrettably, individuals who purchased BigBear.ai shares at $5 have found themselves in a similar situation to numerous investors who acquired certain stocks in the early 2000s merely due to the “dot-com” label. By mid-August 2024, BigBear.ai stocks were trading at $1.26 each.
Meanwhile, Nvidia the stock continued to rise steadily even after the initial excitement around AI had subsided, similar to Amazon stock did after the initial surge of dot-com excitement. Up to this point, BigBear.ai doesn’t appear to be the long-term success stories that Nvidia and Amazon became.
This doesn’t imply that BigBear.ai will meet the same fate as Pets.com. Instead, it’s a warning to overly enthusiastic investors who haven’t learned from past experiences and are hoping to turn their $100,000 into $1 million by relying on a wave of tech adoption that won’t benefit everyone equally.
A reduced loss, accompanied by a caveat
Although BigBear.ai stock is likely to fluctuate with the enthusiasm surrounding generative AI, the company’s financial health will remain important. Ultimately, the stock market’s focus on financial fundamentals will prevail in the long run.
It appears that BigBear.ai, established in February 2021, has seldom made a profit. In the second quarter of 2024, the company disclosed a net loss of $11.7 million, which is an improvement compared to the $16.9 million loss recorded in the same quarter the previous year.
It’s concerning that BigBear.ai faced another quarterly net loss exceeding $10 million. With a cash reserve of $72.3 million as of June 30, there is a question of how many more quarters of net losses the company can realistically withstand.
Moreover, BigBear.ai’s reduction in net loss wasn’t due to significant revenue expansion. In fact, the company explained that the main reason for the reduced net loss in the second quarter was a $11.0 million change in the fair value of warrants issued in 2024. Revenue increased by 3.4% from the previous year to $39.8 million, which isn’t bad, but it’s not particularly impressive either.
Additionally, net income or loss is not the sole method for evaluating a company’s overall performance. BigBear.ai announced their results for the second quarter of 2024. non-GAAP (adjusted) EBITDA a loss of $3.7 million, compared to a loss of $3.2 million in the same quarter the previous year. This indicates that the company did not show improvement across all metrics.
BigBear.ai has tasks ahead, and it’s quite risky to rely on widespread industry excitement to achieve a tenfold return. So, while it’s okay to invest in a small number of shares, it’s too optimistic to anticipate that $100,000 invested in BigBear.ai stock will grow to $1 million.
Is investing $1,000 in BigBear.ai a good idea at the moment?
Prior to purchasing shares in BigBear.ai think about this:
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