Shares of specialist in server and storage solutions BigBear.ai (NYSE: BBAI) charged sharply higher on Tuesday, with an increase of as much as 20.9%. At 11:52 a.m. ET, the stock was still up 19.1%.
The catalyst that sent the artificial intelligence (AI) specialist flying higher was an optimistic commentary in an international publication that compared it favorably to the data mining and AI specialist. Palantir Technologies (NASDAQ:PLTR).
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According to him, BigBear.ai has the potential to become the next Palantir The Economic Times. Because the company is much smaller and has a much lower market capitalization, it has the potential to be a big winner for investors, according to the report. At just $668 million, BigBear is much smaller than Palantir at $159 billion (at the time of writing).
BigBear.ai has received a lot of attention since the advent of generative AI early last year. The company provides decision intelligence solutions, enhanced by AI and machine learning, to help business leaders make informed decisions. If that sounds a lot like what Palantir is doing, there are similarities.
As my colleague Dan Victor noted, “Both specialize in AI and machine learning cloud-based software that helps organizations analyze complex data sets to gain predictive insights.” He also mentions an “ongoing strategic partnership” with Palantir that could benefit BigBear.ai.
Palantir’s Artificial Intelligence Platform (AIP) is gaining wide acceptance among enterprise and government customers, and is known for its ability to provide a wide range of solutions to everyday business problems. In turn, BigBear.ai is still focused on smaller, more specialized solutions, limiting its current advantage.
To be clear, a lot of things have to go right for BigBear to make the jump to the big leagues. In the third quarter, the company generated revenue that rose 22% to $41.5 million, resulting in a loss per share of $0.05. Compare that to Palantir’s revenue of $726 million and earnings per share of $0.06, and the most obvious difference comes into focus.
However, at about three times forward sales, BigBear is by far the better bargain, compared to 46 times forward sales for Palantir. That said, the smaller size and lack of profit make BigBear.ai a riskier proposition, so any investment should be sized appropriately.
Before purchasing shares in BigBear.ai, consider the following:
