Are you thinking about betting big money on BigBear.ai Holdings (NYSE: BBAI) ? Hold your horses. BigBear.ai's share price pops and drops may have had more to do with general artificial intelligence (AI) sentiment shifts than anything specific to the company.
Moreover, drilling down on BigBear.ai's latest round of financial figures might not put you in the mood to slap down a cool $100,000 on BigBear.ai stock (assuming you have that much available to invest that you don't need for anything in the short or medium term). Indeed, such a sizable wager would likely be better staked on a business that's fueled less by hype and hope, and more by actual profits.
Tracking the rise of AI fervor
2022 was an awful year for technology stocks generally. However, 2023 started off with a bang as ChatGPT kicked off a wave of interest in all things AI.
By luck or by design, BigBear.ai literally had "AI" in its name when the generative AI hype cycle commenced. BigBear.ai stock raced from $0.76 to more than $5 per share in early 2023. The company helps customers analyze data and take action.
Unfortunately, folks who bought BigBear.ai stock at $5 have so far ended up in the same boat as many investors who purchased certain stocks in early 2000 just because they had "dot-com" attached to their names. As of mid-August 2024, BigBear.ai shares traded at $1.26 apiece.
Meanwhile, Nvidia stock maintained an upward trajectory even after the initial AI hype phase, much like Amazon stock did after the initial burst of dot-com hype. So far, BigBear.ai doesn't look like the huge, sustained winners that Nvidia and Amazon turned out to be.
This doesn't mean BigBear.ai will end up like Pets.com did, either. It's just a cautionary note for overeager investors who haven't considered the lessons of the past, and who hope to 10x their $100,000 into $1 million based on a tech-adoption rising tide that won't equally lift all boats.
A narrowing loss, but with a footnote
While BigBear.ai stock will probably continue to track the rise and fall of generative AI fervor, more or less, the company's financials will still be relevant. After all, the stock market's weighing machine always comes into play sooner or later.
As it turns out, BigBear.ai, which was incorporated in February 2021, has rarely been profitable. For 2024's second quarter, BigBear.ai reported a net loss of $11.7 million, which is at least better than the company's $16.9 million from the year-earlier quarter.
Still, it's not encouraging that BigBear.ai incurred another quarterly net loss over $10 million. The company's cash balance was $72.3 million as of June 30, so one might wonder how many more quarterly net losses BigBear.ai can reasonably tolerate.
Besides, it's not as if BigBear.ai's narrowing net loss was attributable to massive revenue growth. Indeed, the company said that its second-quarter "decrease in net loss was primarily driven by the change in fair value of warrants issued in 2024 of $11.0 million." Revenue grew 3.4% year over year to $39.8 million -- not dismal, by any means, but also nothing to write home about.
Moreover, net income or loss isn't the only way to measure a company's bottom-line performance. BigBear.ai reported Q2 2024 non-GAAP (adjusted) EBITDA of -$3.7 million, versus -$3.2 million in the year-earlier quarter. In other words, the company didn't demonstrate improvement according to every metric.
BigBear.ai has some work to do, and it would be awfully risky to count on sectorwide fervor yielding a 10-bagger. Therefore, while it's fine to speculate on a few shares, it's overly optimistic to expect $100,000 in BigBear.ai stock to turn into $1 million.
John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. David Moadel has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Amazon and Nvidia. The Motley Fool has a disclosure policy .
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