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On Friday, H.C. Wainwright analyst Scott Buck revised the price target for BigBear.ai Holdings (NYSE:BBAI) to $6.00, a decrease from the previous $7.00, while maintaining a Buy rating for the stock. Following the announcement of BigBear.ai’s fourth-quarter operating results after the market closed on Thursday, the adjustment was made. The company’s revenue of $43.8 million fell significantly short of the anticipated $54.6 million, causing a miss in the full-year guidance range of $165.0 million to $180.0 million. According to InvestingPro data, BBAI’s current market capitalization stands at $1.06 billion, with the stock trading at $4.20, down nearly 19% over the past week.
The forecast for 2025 indicates only a modest revenue increase, with projections ranging from $160.0 million to $180.0 million. This represents a 7.4% growth at the midpoint, which is below the current estimates of $193.9 million. The tempered expectations for the upcoming year are attributed to potential delays and disruptions as the federal government transitions to a new administration. InvestingPro analysis shows the company has struggled with profitability, reporting an EBITDA of -$33.8 million in the last twelve months, with analysts not expecting profitability this year.
Despite the near-term challenges, H.C. Wainwright remains optimistic about BigBear.ai’s long-term prospects. The firm recognizes that the markets BigBear.ai serves, such as border security, defense, intelligence, and critical infrastructure, are likely to receive increased investments. Furthermore, the company is expected to benefit from the Department of Government Efficiency (DOGE) initiatives as a government efficiency enabler. While analyst targets range from $1.50 to $7.00, the stock’s recent performance has been mixed, with a remarkable 226% gain over the past six months despite recent volatility.
Earlier in the year, BigBear.ai took significant steps to improve its financial position by de-leveraging its balance sheet. This was achieved through warrant conversion and the exchange of outstanding convertible notes. As a result, the company currently has approximately $115.0 million in cash, and its debt to cash ratio has improved to 1.2x from 4.0x at the end of the fourth quarter. InvestingPro data indicates the company maintains a weak overall financial health score of 1.52 out of 5, with a concerning current ratio of 0.46, suggesting potential liquidity challenges.
Despite the reduced revenue outlook and the anticipated pressure on BBAI shares at the market opening on Friday, H.C. Wainwright advises that any dip in share price could be seen as an opportunity to accumulate a position. The firm’s decision to maintain the Buy rating reflects their confidence in the company’s potential for growth and recovery. Based on InvestingPro’s Fair Value analysis, the stock appears to be trading above its intrinsic value, with a gross profit margin of 28.6% in the last twelve months.
In other recent news, BigBear.ai Holdings reported fourth quarter earnings that fell short of analyst expectations, with revenue totaling $43.8 million, which was below the anticipated $53.84 million. The company also reported an adjusted earnings per share of -$0.43, missing the estimate of -$0.06. For the full year 2025, BigBear.ai provided revenue guidance between $160 million and $180 million, which is lower than the $193.9 million projected by analysts. Despite these misses, the company noted an improvement in its gross margin to 37.4% in Q4 2024, up from 32.1% in the previous year. BigBear.ai also reported a significant increase in its backlog, reaching $418 million by the end of 2024, which is 2.5 times higher than the prior year. The company has made strides in deleveraging its balance sheet, reducing net debt from $150 million to $27 million through warrant exercises and debt conversions. CEO Kevin McAleenan highlighted major contract wins and a maturing technology portfolio as positive developments. However, the company cautioned that potential changes in U.S. government priorities could affect its 2025 outlook.
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