Could BigBear.ai Become the Next Palantir Technologies?

Palantir Technologies is currently on a remarkable path, delivering an exceptional year for its shareholders. The company has seen its stock rise by an astonishing 285% year to date, fueled by rapid growth and a surge in profitability. Many investors are optimistic, believing that Palantir, as an innovator in artificial intelligence (AI), is just beginning to tap into a vast global market.

While Palantir is experiencing great success, investors should also consider other players in the tech industry that are making waves through disruptive innovations. BigBear.ai (BBAI) is one such smaller company developing various AI applications with significant potential.

But can BigBear.ai follow in Palantir’s footsteps? Here’s what you need to understand.

BigBear.ai vs. Palantir Technologies

BigBear.ai has a market capitalization of $550 million, which is small compared to Palantir's hefty $150 billion valuation. Despite this difference in size, both companies share some similarities in focus. They both provide AI and machine learning software that helps organizations analyze complex data and gain predictive insights. Notably, BigBear.ai and Palantir maintain a strategic partnership to combine their capabilities.

Tools like generative AI and workflow automation have become game-changers for businesses, leading to immense demand across various sectors of the economy. So far, Palantir has taken the lead with comprehensive solutions, while BigBear.ai is targeting niche markets and may not have reached its potential yet.

Palantir has successfully shifted its focus beyond government contracts toward commercial applications. In its latest quarterly report for the period ending September 30, Palantir's revenue grew by 30% compared to the previous year, primarily due to large enterprises adopting its AI Platform (AIP). This revenue growth has positively impacted its earnings, with expectations for continued success into 2025 and beyond.

Conversely, BigBear.ai has been mainly relying on a few large contracts from the Department of Defense, and it is yet to achieve a breakthrough moment. In its recent third-quarter results, the company reported a revenue increase of 22% year-over-year, although this follows a trend of less encouraging numbers in earlier quarters.

Unlike Palantir, BigBear.ai currently operates at a loss, which puts downward pressure on its stock price. For BigBear.ai to be regarded as the next Palantir, it will need to demonstrate significantly stronger growth.

Metric	BigBear.ai 2024 Estimate	Palantir Technologies 2024 Estimate
Revenue	$169 million	$2.8 billion
Revenue change (YOY)	8.6%	25.5%
Earnings 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 Strength in Computer Vision

BigBear.ai excels in the area of AI-powered computer vision. Its Pangiam digital identity brand incorporates biometrics with real-time imaging and video technology to detect anomalies and enhance security. Major airports around the world are already using BigBear.ai products such as the "TrueFace" and "veriScan" systems for security screening.

The investment appeal of BigBear.ai lies in its innovative vision-AI technology, which has applications that extend across various industries, including healthcare diagnostics, agricultural monitoring, retail inventory management, and quality control in manufacturing.

Investors who believe in BigBear.ai's ability to execute a growth strategy in new commercial areas may find the current stock a worthy addition to their portfolios.

Moreover, BigBear.ai's shares are currently valued at nearly four times its projected annual revenue based on Wall Street estimates, presenting a forward price-to-sales ratio that is a substantial discount compared to Palantir's astronomical 54. This suggests that while Palantir's stock price has escalated, BigBear.ai may offer more value and greater potential upside if it begins to exceed expectations.

Conclusion

The main question for investors is not whether BigBear.ai will ever surpass Palantir in value but whether it can achieve similar high returns in its stock price. This potential remains a possibility, especially with 2025 being pivotal for the company to showcase its AI solutions in new commercial applications.

For now, BigBear.ai’s challenges, including its precarious financial position, could keep its stock under pressure. However, for long-term investors who are willing to accept some volatility, incorporating BigBear.ai into a well-diversified investment strategy could be beneficial.

Dan Victor has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Palantir Technologies. The Motley Fool has a disclosure policy.

AI, Investment, Stock