Could BigBear.ai Become the Next Palantir Technologies?

Palantir Technologies is having an impressive year, offering its shareholders high growth and increasing profitability. Currently, the stock has experienced a remarkable 285% return so far this year. This surge is fueled by market excitement surrounding Palantir as an innovator in artificial intelligence (AI) and its potential for ongoing global expansion.

While Palantir captures a lot of attention, investors should also explore other companies in the tech sector that are paving their paths in AI innovation. One notable example is BigBear.ai (BBAI -3.93%), a smaller company that is developing various AI applications with significant prospects.

So, could BigBear.ai follow in Palantir's footsteps? Here’s what to consider.

Comparing BigBear.ai and Palantir

BigBear.ai has a market capitalization of around $550 million, making it significantly smaller than Palantir, which boasts an equity value of approximately $150 billion. Despite this difference in scale, the two firms share some key similarities. Both are focused on AI and machine learning, specializing in cloud-based software that helps organizations analyze complex data to make predictive insights. Additionally, BigBear.ai and Palantir are already collaborating through a strategic partnership aimed at enhancing both companies' capabilities.

Both groups are benefiting from innovations like generative AI and workflow automation, which are transforming productivity and drawing strong interest from a wide range of businesses. Palantir has achieved success with comprehensive, end-to-end solutions, while BigBear.ai is still working to gain traction by focusing on niche markets with its specialized offerings.

A significant trend for Palantir has been its successful expansion from its traditional focus on government and defense sectors to commercial applications. In its latest reported quarter (ending September 30), Palantir saw a revenue increase of 30% year-over-year, largely driven by large enterprise clients adopting its Artificial Intelligence Platform (AIP). This revenue growth has led to significantly higher earnings, with expectations for continued upward momentum into 2025 and beyond.

In contrast, BigBear.ai is still searching for its major breakthrough as a large portion of its revenue comes from a few sizable Department of Defense contracts. In its recent third quarter (also ending September 30), BigBear.ai reported a revenue increase of 22% from the previous year, marking a slight recovery following weaker performances in earlier quarters.

Unlike Palantir, BigBear.ai is currently not profitable and continues to operate at a loss, which has pressured its stock price. For BigBear.ai to emerge as the next Palantir, it needs to demonstrate significantly stronger growth.

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 Computer Vision Leadership

BigBear.ai distinguishes itself through its early leadership in AI-powered computer vision technology. Its Pangiam digital identity brand utilizes biometrics along with real-time video and image data to automatically detect anomalies and secure against threats. Currently, numerous major airports around the world are deploying products such as the TrueFace and veriScan detection systems from BigBear.ai for security screening.

Ultimately, the investment appeal of BigBear.ai lies in its unique vision-AI technology, which presents opportunities across varied sectors beyond just transportation and logistics. Its platform holds potential for transformation in industries like healthcare diagnostics, agricultural monitoring, retail inventory management, and manufacturing quality control.

Investors who are confident in BigBear.ai's potential for executing a growth strategy into new commercial sectors may find value in the stock today.

Notably, BigBear.ai's stock is trading at a forward price-to-sales (P/S) ratio of under 4 times its estimated 2024 revenue, which is a considerable discount compared to Palantir's elevated forward P/S ratio of 54. This suggests that Palantir's stock may be overpriced, while BigBear.ai could offer greater value, and its shares may have more room to grow if it exceeds expectations.

Final Thoughts

The crucial question for investors is not if BigBear.ai will reach a higher market value than Palantir but if it can achieve similar lucrative performance. This possibility appears viable, especially as 2025 could be a pivotal year for BigBear.ai to showcase its innovative AI solutions in new commercial markets.

However, it's important to acknowledge that BigBear.ai’s current weaker fundamentals and ongoing financial uncertainties might keep its shares under pressure. For investors with a focus on the long term and who can manage volatility, including BigBear.ai stock within a diversified portfolio could be worthwhile.

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.

AI, Investment, Stock