Why BigBear.ai Could Rally 100% and Catch Palantir Soon

Key Points

• Bigbear.ai keeps making new breakthroughs in its way to higher prices, a story that investors need to keep track of for their portfolio upside.
• With fundamentals, momentum, and financials to back it, BigBear.ai could become the next Palantir story.
• Valuations suggest that BigBear.ai could retest its all-time high prices for up to 100% upside from today.

Every investor is familiar with one of the most successful and widely followed stories in the market today, particularly in the world of aerospace and defense stocks. However, there is a new stock in the mix that has proven to be potentially just as successful as its leading peer (if not more) due to its underlying technology and prime positioning in the industry.

It may not seem like it at first, but BigBear.ai Holdings Inc. NYSE: BBAI now has everything it takes to catch up to the infinitely more popular Palantir Technologies Inc. NASDAQ: PLTR. When it comes to home run stocks, such as Palantir, over the past few years, there are usually three key factors that need to be in place to get things running smoothly.

First is the popularity aspect. Not only has Palantir achieved top ranks in the market through financial growth and success, but also due to its marketing efforts (everyone knows the CEO is an eccentric figure); even memes have been created about Palantir whenever the occasion calls for it in the Twitter and YouTube space.

The other two aspects rhyme in terms of fundamentals, and that is exactly what BigBear.ai brings to the table today.

One Small Push for 100% Runs in BigBear.ai

Over the past 12 months alone, BigBear.ai has cone on an incredible 287% rally to beat the broader S&P 500 index and most other stocks in the industry, with a quarterly performance of up to 92.3% as investors zoom in further into this phenomenon.

However bullish this run has been, the stock still trades at only a fraction of its all-time high price of just under $10 per share, which in itself implies the stock can deliver another 100% rally to retest those highs. With this in mind, investors can take Palantir’s story as a successful case study and start looking for the same things in BigBear.ai.

As investors are now aware, popularity is one of these aspects, and a simple Google Trends search for the word BigBear.ai will reveal to investors just how popular this stock has become in recent weeks compared to the past, with searches surging into the triple digits.

The second aspect stems from a key fundamental event that needs to occur for all these younger companies, especially in defense, namely a steady stream of new contracts from the government or other customers.

A 30% rise in backlog orders and a fourfold increase in R&D budgets satisfy this checklist item.

An advantage that BigBear.ai investors have over Palantir is that BigBear.ai is a $2 billion company, not a $300 billion one, which means their main objective is to land clients as soon as possible, regardless of terms and pricing. This makes BigBear.ai a prime candidate for the military to start looking into.

Finally, it all comes down to the underlying technology aspects, which show that BigBear.ai is not so different from Palantir; if anything, it is more focused on the new methods of modern warfare, such as guiding unmanned vehicles and missions altogether.

Using artificial intelligence and machine learning models to get this technology working and scaling places BigBear.ai in the hands of a bullish fate since valuations today show a significant discount to other peers in the software and artificial intelligence space.

A Big Gap Remains Unfilled

As of today, BigBear.ai stock trades at only 56% of its 52-week high, leaving plenty of room for it to catch up and try to flirt with its all-time high prices once more (if not break them), and this time, it has all of the fundamental backing for it to get it done.

In broader valuation terms, investors can see that BigBear.ai stock trades at only 7.0x its underlying asset base, mostly comprised of intangible assets (likely the IP running its artificial intelligence models). As is customary in financial analysis, this multiple wouldn’t mean much without a benchmark to compare it against.

Other names that operate in similar technology consistently trade at an average multiple of assets of around 18.0x, which is over 100% over BigBear.ai and its valuation today. Closing this valuation gap (as well as the price action gap) would justify targeting the stock’s all-time highs of just under $10 per share.

One catalyst, which may have been hinted at in the latest quarterly results, is that the increase in R&D spending along with backlog orders may actually turn the financial trajectory much higher than everyone expects today, which could trigger a rating increase from Wall Street as well as new institutional buying flow to come in.