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BigBear.ai’s Shares Tumble Nearly 22% as Revenue Growth Fails to Meet Expectations

Last Updated March 8, 2024 2:31 PM
Giuseppe Ciccomascolo
Last Updated March 8, 2024 2:31 PM

Key Takeaways

  • BigBear.ai’s latest financial results fell short of analyst expectations.
  • Following the disappointing earnings report, BigBear.ai’s stock price dropped significantly.
  • The company predicts revenue growth for 2024 but the market awaits updates on earnings estimates.

BigBear.ai Holdings  is one of several smaller companies experiencing a surge in stock performance as investors seek opportunities in the artificial intelligence (AI) sector.

However, despite this momentum, the company’s latest financial results  failed to meet Wall Street’s expectations. Despite finishing Thursday’s regular session with a market capitalization just above $800 million, BigBear.ai shares plummeted  nearly 22% in after-hours trading. This was due to the company’s revenue and loss figures that disappointed investors.

BigBear.ai’s Turnover Misses Market Estimate

BigBear.ai, a company specializing in AI solutions for national security and supply chain decision-making, experienced minimal revenue growth in the fourth quarter. Its top-line revenue reached $40.6 million, up only 0.5% from the previous year. The turnover fell short of the FactSet analyst consensus  of $42.8 million.

While the company managed to narrow its losses in the December quarter, the improvement was not as significant as analysts had anticipated. BigBear.ai reported a net loss of $21.3 million, or 14 cents per share, compared to a loss of $29.9 million, or 23 cents per share, in the same quarter the year before. Analysts had expected a loss of 5 cents per share, according to FactSet.

The net-loss figure for the latest quarter included $9.4 million in non-cash expenses. It relates to a change in the fair value of warrants issued the previous year, as well as $6.1 million in expenses from stock-based compensation. In comparison, the year-prior quarter’s figures included $18.3 million in noncash impairment charges and $2.6 million in restructuring charges.

BigBear.ai results
BigBear.ai results l Source: Yahoo Finance

Despite these challenges, BigBear.ai posted adjusted earnings before interest, taxes, depreciation, and amortization – Ebitda – of $3.7 million, a significant improvement from a loss of $2.5 million by that metric the year before. However, the FactSet consensus had anticipated adjusted Ebitda of approximately half a million dollars

Market Reacted Negatively

The market started to sell BigBear.ai shares after the earnings went out, with the stock dropping by 22% at the end of after-hours trading on Thursday, March 7, 2024. At the time of writing, during pre-market  on March 8, the stock is experiencing a further 21% sink. But, apart from the recent dips, 2024 hasn’t been so negative for BBAI stock so far.

In fact, BigBear.ai stock experienced significant gains throughout February’s trading. The company’s share price closed the month up by 107%, as reported  by S&P Global Market Intelligence. BigBear.ai Holdings shares have surged approximately 78.5% since the beginning of the year, outperforming the S&P 500’s gain of 7%.

BigBear.ai is among several AI-focused companies that have experienced stock fluctuations following their earnings reports. SoundHound AI (SOUN) is another example of facing downward pressure  on its stock after its recent results.

Meanwhile, shares of major chip companies Marvell Technology  (MRVL) and Broadcom  (AVGO) declined in Thursday’s extended trading session. Marvell cited challenges in non-AI segments of its business, while Broadcom maintained its full-year forecast.

What’s Ahead For BigBear.ai?

Looking ahead, BigBear.ai has forecasted revenue of $195 million to $215 million for the upcoming year. This figure surpasses analysts’ expectations  of $173.7 million. This projection includes anticipated results from the recent acquisition  of Pangiam, completed in late February.

For the future, BigBear.ai CEO, Mandy Long, stated : “With the completion of the Pangiam acquisition and incremental cash proceeds of $54 million from warrants exercised in Q1 2024, we are well positioned for healthy growth in the year ahead.”

As the market awaits updates on estimates  for the upcoming quarters and the current fiscal year, the current consensus EPS estimate stands at minus $0.07 on $42.43 million in revenues for the next quarter and minus $0.27 on $174.48 million in revenues for the current fiscal year.

The recent surge in AI stocks can be attributed to the overall bullish sentiment in the AI sector. Although there hasn’t been any specific news driving the company’s stock price higher, the enthusiasm surrounding AI, coupled with strong business performance from industry leaders such as Nvidia, Palantir, and C3.ai, has contributed to remarkable gains for BigBear.ai. Despite recent dips due to disappointing results, similar trends may continue in the future.

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