$BBAI The Go-To AI Provider For Federal AgenciesThe recent AI hype following the release of Open AI’s ChatGPT had a significant effect on the majority of AI stocks including BigBear.ai Holdings, Inc. (NYSE: BBAI). BBAI is a leading AI-driven decision-making software provider, where the company mainly serves the US national defense and intelligence agencies. However, the company started expanding to more commercial markets throughout the previous year – specifically in industries with a high AI addressable market. With Elon Musk starting his new AI company, BBAI stock and other AI stocks could witness another phase of hype. This could cause a possible short squeeze following the recent short interest on BBAI stock after recent speculations about possible AI industry regulations.
BBAI Fundamentals
After the recent success and widespread use of OpenAI’s ChatGPT, AI stocks witnessed a significant amount of hype causing a large number of AI stocks to run massively last February. Some of these stocks are C3.ai, Inc. (NYSE: AI), Soundhound AI, Inc. (NASDAQ: SOUN), Guardforce AI Co., Limited (NASDAQ: GFAI), and BBAI stock that ran nearly 118% during the first week of February.
BBAI has a long 22-year history of providing the Department of Defense and Intelligence agencies with better decision-making via AI-powered predictive analytics software solutions and empowering strategic actions via cyber engineering, cloud transformation, and agile operations expertise and resources. BBAI serves a total of 19 US Defense and Intelligence Agencies including the U.S. Intelligence Community, the Department of Defense, and the U.S. Federal Government.
Also, the company has secured a number of contracts over the past few years including a Multiple Award 10-Year HKEX:900 Million IDIQ Contract with the U.S. Air Force, a nine-month $14.8 million Army contract to roll out the service’s Global Force Information Management system, and a five-year, single award National Security Agency contract. Since BBAI doesn’t have any known competitors in this niche, the company has a major competitive edge which could allow it to be one of the best artificial intelligence stocks to hold onto for the long term.
However, BBAI started expanding to other markets with the company acquiring ProModel corporation – a provider of simulation-based predictive analytics software – last year which added more than 200 commercial customers to the company. This acquisition allowed BBAI to provide its AI and machine learning solutions to new markets with significantly high compound annual growth rates (CAGR) such as healthcare, shipbuilding, manufacturing, and other industries. In this way, BBAI expects to grow its commercial sales to 10% of total revenues in 2022 from only 1% in 2021.
With this in mind, the AI/ML market is expected to reach HKEX:310 billion, but most importantly, AI/ML in target industries in the manufacturing, healthcare, and supply chain industries is seeing fast growth. The AI/ML addressable market is expected to increase from $2.3 billion to $16.4 billion in 2027 with a CAGR of 47.9% in the manufacturing industry, from $6.9 billion to $67.4 billion in the Healthcare industry with a CAGR of 26.2% and from $2.3 billion to $21.8 billion in the supply chain industry with CAGR of 45.3%.
At the same time, the DoD is accelerating its AI deployment where its addressable market is expected to increase from $6.6 billion to $13.7 billion. With BBAI serving such growing markets the BBAI stock forecast should be looking promising throughout the coming years.
Moving forward, BBAI is looking to further expand its market reach with the company targeting maritime and space/satellites industries after already witnessing some early commercial success in these industries. BBAI is also working on serving more customer needs by partnering with big names such as Autodesk, Inc. (NASDAQ: ADSK), Palantir Technologies Inc. (NYSE: PLTR), and Amazon.com, Inc. (NASDAQ: AMZN)’s AWS via technology integration.
Despite operating at a loss, BBAI has been seeing a steady increase in revenues over the past few years with the company’s revenues increasing from $145.6 million to $155 million over the last year. BBAI also still has HKEX:222 million of federal contract backlogs as of December 2022.
Elon Musk recently launched his own AI company called X.AI Corp which might be a future competitor to OpenAI and its ChatGPT. The company was registered on March 9, and Musk recruited Igor Babuschkin, a scientist working at the artificial intelligence lab DeepMind which is owned by Google’s parent company Alphabet. This could lead to another ChatGPT situation causing even more hype for AI stocks in the future, which could have a positive effect on the BBAI stock forecast.
Recent speculations about possible regulation concerns in the AI industry caused some uncertainty in the AI space – causing an increase in BBAI stock’s short interest at the start of April. As of now, BBAI has a short interest of 17.5%, a high 272.51% cost to borrow, and a 100% utilization rate. As a result, a short squeeze could occur if AI hype continues to grow drastically in the near term following Musk’s AI venture.
BBAI Financials
In its 2022 annual report, BBAI reported $195.3 million in assets, including $12.6 million in cash. BBAI witnessed a decline in assets from $383.3 million including $68.9 million in cash and HKEX:101 million in restricted cash in 2021. BBAI’s liabilities declined YoY to $233.1 million from $260.9 million as its current liabilities declined to $35.7 million from HKEX:70 million. However, the company still has $192.3 million in long-term debt.
BBAI’s revenues grew YoY to $155 million from $145.5 million and its gross profit increased from HKEX:34 million to $42.9 million. However, its operating loss widened to $110.5 million from $78.4 million due to a goodwill impairment expense of $53.5 million. Finally, the company’s net loss slightly decreased YoY to $121.6 million from $123.5 million
Technical Analysis
BBAI stock is trading in an upward channel above the 200 MA which indicates that the trend is bullish. Looking at the indicators, BBAI stock is now trading below the 21 MA and the 50 MA. Moreover, the RSI is neutral at 44 and the MACD is bearish.
Fundamentally, BBAI stock has no major upcoming catalysts. However, AI stocks have been climbing over the past week due to increasing AI hype. Considering Musk’s latest AI venture and the momentum behind AI stocks like BBAI, it could continue its upwards trend in the short term.
If the lower trendline and support holds, a possible play could be to go long after the break out above the 50 MA in hopes of a retest of the upper trendline. Traders could take profit at the 21 MA and the upper trend line with a stop loss right below the $3.06 support. This could offer an R:R of 2 at the 21 MA.
Since BBAI stock has been making lower highs, the support level may break offering the opportunity to take a short position entering after the break with the 50 MA acting as a stop loss and the $2.80 support acting as a take profit. This could offer an R:R of 3.11.
BBAI Forecast
After the recent hype on AI stocks, BBAI started to gain some recognition during the month of February. BBAI already has a large presence in the governmental market with its impressive number of federal contracts, however, it started to expand even more by targeting commercial markets by acquiring ProModel Corporation. BBAI stock forecast could be promising as these markets have a high CAGR percentage. Moreover, the company is integrating the technologies of companies such as Autodesk, Palantir, and Amazon’s AWS to fulfill customer needs. AI stocks could potentially witness another hype phase following the launch of Elon Musk’s AI company X.AI Corp which might cause a short squeeze on BBAI stock as it had an increase in its short interest this month due to concerns about AI regulations. With this in mind, BBAI stock is an AI stock to keep an eye on over the coming months.
