Could BigBear.ai Become the Next Palantir Technologies?

Palantir Technologies has been experiencing remarkable growth this year, leading to considerable returns for its shareholders. As of now, the stock has jumped 285% year to date, fueled by optimism in the market surrounding its potential in artificial intelligence (AI) and global expansion.

While Palantir is impressive, investors should also consider other companies breaking new ground in technology. One such company is BigBear.ai (BBAI), a smaller player within the tech sector that is actively developing various AI applications with significant potential.

So, could BigBear.ai be on track to mirror the success of Palantir? Let's delve deeper.

Comparing BigBear.ai and Palantir

BigBear.ai operates with a market capitalization of about $550 million, which is modest compared to Palantir's valuation of $150 billion. Despite this disparity in size, the two companies share several similarities. Both are focused on AI and machine learning within cloud-based software aimed at helping organizations analyze complex datasets for predictive insights. Notably, they have formed a strategic partnership to leverage each other's strengths.

Key features like generative AI and workflow automation have emerged as game-changers for productivity, attracting strong interest from diverse sectors of the economy. So far, Palantir has achieved greater success thanks to its comprehensive solutions, while BigBear.ai is in the process of gaining traction by catering to specialized niches.

One of Palantir’s significant achievements has been its shift from primarily serving the government and defense sectors to reaching commercial markets. In its most recent third quarter, which ended on September 30, Palantir’s revenue surged 30% year over year, largely due to large enterprises adopting its Artificial Intelligence Platform (AIP). This revenue growth has directly resulted in much higher earnings, with expectations for continued positive trends through 2025 and beyond.

In contrast, BigBear.ai is still waiting for that defining breakthrough and largely relies on a few sizable contracts from the Department of Defense. Its revenue in the third quarter was up by a solid 22% compared to the previous year, but it follows a series of weaker performances in prior quarters.

Unlike Palantir, BigBear.ai is currently operating at a loss and is not profitable. This ongoing cashflow issue has put pressure on its stock price. For BigBear.ai to rival Palantir's success, it will need to significantly strengthen its growth metrics.

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 Unique Strengths

What sets BigBear.ai apart is its early leadership in AI-powered computer vision technology. Its Pangiam digital identity platform utilizes biometrics, real-time images, and video feeds to automatically identify anomalies, enhancing security measures. Various international airports currently use BigBear.ai's products, including the "TrueFace" and "veriScan" verification systems to improve security screening processes.

Ultimately, BigBear.ai's appeal as an investment lies in its unique vision-AI technology, which has far-reaching applications beyond transportation and logistics. The possibilities for this platform extend into numerous industries, such as healthcare diagnostics, agricultural monitoring, retail inventory management, and manufacturing quality control.

For investors with faith in BigBear.ai's ability to implement a growth plan and tap into new commercial markets, there are compelling reasons to consider purchasing stock now.

Moreover, BigBear.ai's shares are currently valued at under four times their estimated revenue, indicating a forward price-to-sales (P/S) ratio that offers significant value compared to Palantir's soaring 54 P/S ratio. This disparity suggests that while Palantir may be seen as expensive, BigBear.ai presents a more attractive opportunity that could yield greater gains if its performance begins to surpass expectations.

Concluding Thoughts

The main question for investors is not whether BigBear.ai can surpass Palantir in value, but rather if it can achieve a similar level of investment performance. There is a possibility for this to happen, particularly with 2025 being a crucial year for BigBear.ai to showcase its differentiated AI solutions across new commercial applications.

However, at present, the fundamentals and financial uncertainties surrounding BigBear.ai may keep its shares under pressure. Investors who maintain a long-term investment perspective and can handle potential volatility may find BigBear.ai to be a valuable addition to a diversified portfolio.

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.

BigBear, Palantir, Investing