High-flying artificial intelligence (AI) stocks have taken the market by storm, soaring to stratospheric valuations.
Many investors think the party will continue considering the potential of AI and the growing market size.
Few have benefited more than $Palantir Technologies Inc.(PLTR)$, a software platform that allows its users to leverage AI to analyze data and vastly optimize businesses and other organizations.
Numerous US intelligence agencies use Palantir's platform in their counterterrorism efforts.
As a result, PLTR has risen a whopping +340% in just 2024 alone.
Given Palantir's success, investors have been on the hunt for similar, lesser-known companies operating in the same space and perhaps with the same appeal.
And they have found two such companies - $BigBear.ai Holdings(BBAI)$ and $C3.ai, Inc.(AI)$.
These 2 stocks have had their fair share of volatility over the past year.
Wall Street analysts are keeping a close eye on both AI stocks.
They think one can soar by as much as +108%, while telling investors to sell the other.
It’s a Buy with Potential home run!
BBAI describes itself as a leading provider of AI-powered decision making.
In March 2024, it acquired Pangiam, a fellow AI company that specializes in global trade, travel, and digital identification - leveraging its AI-powered facial recognition capabilities for the variety of industries.
BBAI focuses on 3 markets.
This includes:
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National security.
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Supply chain.
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Digital identification.
With government contracts, BigBear.ai's solutions offer predictive & forecasting capabilities useful for:
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Managing risk.
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Overseeing the transport of goods and people in difficult environments.
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Event prediction.
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Facilitate relationships between vendors and suppliers.
Under supply chain, BigBear.ai's platform help companies map out capital investment, building design, equipment purchases, and more.
Through 2024’s first nine months, BBAI generated roughly $114.5 million in revenue, that is comparable to the same period in 2023.
However, BBAI also generated much higher losses in 2024 too, due to a onetime $85 million goodwill impairment charge.
Majority of the company's revenue comes from government contracts.
As of 17 Jan 2025
Analysts’ assessment.
According to TipRanks, 4 analysts have issued research reports on BBAI over the last several months:
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3 analysts rate the stock as a “Buy”, while the last had a “Hold” rate for BBAI.
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BBAI has an average price target of $4.33.
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This implies about +10.46% upside from Fri, 17 Jan 2025’s closing price of $3.92 per share.
According to H.C. Wainwright, Analyst, Scott Buck recent assessment:
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It has BBAI’s highest price target of $7, implying a +78.578% possible upside.
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Scott Buck attributed the high price target to (a) increasing demand for BBAI's products and (b) the exchange and extension of a senior convertible note, removing near-term dilution risk.
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Buck also believes pure-play AI companies deserve higher valuations.
Concerns !
BigBear.ai is not yet profitable and trades at a forward price-to-sales ratio (P/S) of roughly 4.4, that is not demanding for a company in the AI business.
Investors are right to worry about BBAI’s balance sheet and wonder whether it will eventually need to raise more capital and dilute shareholders, as a result.
Also, a lack of revenue growth is a valid concern because BBAI has been trying to position itself as a growth stock.
BigBear.ai certainly has potential.
It makes sense to start with a small position until more revenue growth materializes.
It’s a Sell with Implied upside!
Wall Street analysts rarely recommend selling stocks.
This is because they often work for banks that do business with the companies they analyze.
To maintain these relationships, analysts may avoid negative ratings.
Investors are aware of this.
When an analyst is pessimistic, they might either (a) downgrade the stock slightly or (b) keep their rating unchanged but lower the price target.
Seeing a sell rating should be a red flag for investors.
Compounding the severity is when 4 of 10 analysts issued research reports (in recent months) telling investors to sell C3.ai.
This should be an alert/prompt for investors to conduct their own assessment and draw their own conclusions.
A bit of background.
C3.ai has a platform that makes it easier for companies to develop enterprise AI solutions.
The platform enables:
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Data integration and management services.
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AI app development.
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Security services.
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Apps development minus a lot of coding, via its AI-studio.
C3.ai claims its platform can help businesses, (1) streamline processes and (2) unlock hundreds of millions or even billions of sustained value.
In November 2024, the company announced a partnership with Microsoft's Azure platform, where its C3.ai platform will be available to commercial clients via subscription.
Quarterly earnings.
In its latest quarterly earnings, C3.ai revenue grew +29%, its highest growth rate over the last 2 years.
Revenue through the first six months of C3.ai's current fiscal year is up nearly +24% YoY.
However, losses over this period have only narrowed by about -4%.
The other “good” news is C3.ai is still debt-free.
As of 17 Jan 2025
Although there were 4 “Sell” ratings on C3.ai, the average price target implies nearly +18% upside from current levels.
The high price target of $55 implies over +73% upside.
KeyBanc, Analyst, Eric Heath has:
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In late December 2024, downgraded C3.ai to “Underweight”, with a price target of $29.
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It cited concerns with C3.ai’s valuation and earnings estimate that looked too high.
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Disbelief C3.ai warranted a price-to-sales ratio (P/S) of 13.3, when the company’s revenue is growing only between 10%-20%, leading to a bad risk-reward proposition.
JPMorgan Chase analyst also:
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Downgraded C3.ai to “Underweight”.
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Cited company's "subpar growth-plus-margin” performance as potential concerns.
Comparing both companies’ recent revenue growth & balance sheet trends:
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In some ways, C3.ai is better positioned than BBAI.
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However, it also trades at a much higher valuation.
Despite a “mixed” review, C3.ai at least deserves a watch-spot on one’s watch list.
My personal view: (mine only)
Upon digging further, below are my personal discoveries:
Listings.
Their roads to listing on the NY stock exchange, could not have been further different.
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C3.ai has gone through the traditional IPO route and went public on 9 Dec 2020.
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BBAI has gone through the SPAC route, that was very popular between late 2020 to mid-2021.
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GigCapital4 is a SPAC that merged with BigBear.ai on 8 Dec 2021, almost a year after C3.ai’s IPO.
Compare past 5 years performances.
As of 17 Jan 2025
Looking at both stocks past 5 years performances: (see above)
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Both are still languishing from their “all time highs”.
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C3.ai peaked at $161 per share, while BBAI peaked at $12.63 per share.
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5 years on, C3.ai is still -73.23% off its peak, while BBAI is still -59.25% off its.
Vested Interest.
I have actually covered BBAI in 3 of my 2024 posts: (click on each for details):
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19 Dec 2024 - BBAI : Nothing bearish about BigBear AI.
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18 Dec 2024 - US Market Rebound & Mirror BBAI's Surge ?
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14 Dec 2024 - BBAI the next PLTR ? Buy ? Read & Know !
Looking back, I have actually posted in almost quick successions, one after another, revealing the stock’s popularity slightly over a month ago. Wow !
On the other hand, the media used to compare C3.ai with PLTR, because both were listed less than 3 months apart.
I had a post, dated 12 Sep 2024 detailing the comparison as well. (click here ! for details.)
No prizes for guessing which stock fared better than the other.
With C3.ai being compared to a “junior” stock, is there a need for further homework to validate the claims or deep inside us, we already have a winner ?
Must Read: Click on below titles to access. Repost to share, Like as encouragement ok. Thanks.
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Do you think C3.ai is a better stock than BBAI ?
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Do you think BBAI has more earnings potential, after going thru my 2024 posts on BBAI “akan datang” projects for 2025 & beyond ?
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Comments
Pls "Re-post" so that more get to know. Tks! Rating is important (to me).
Consider "Follow me" and get first hand read of my Daily new posts? Thanks!). Tks!!
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