BigBear.ai shares plunge 30% following earnings; Big bulls should avoid buying the dip

Shares of artificial intelligence play Big Bear.ai (BBAI) tumbled after missing the bottom line and posting revenues that were in line with expectations. The company did provide revenue guidance above expectations but that was due in large part to an acquisition the company made.

The news led to an exodus of investors. This adverse reaction could be attributed to the ongoing AI frenzy, which led to a +75% move higher to start the year. Investors have been piling into AI stocks, and the recent decline in market sentiment may have contributed to the sell-off. 

The news highlighted some of the worries around names in the space as only a few, we are looking at you Nvidia, have been able to produce earnings results worthy of lofty valuations. 

BigBear.ai, an artificial intelligence (AI) company, reported Q4 earnings after the close on Thursday. The company reported a loss of ($0.14) per share, which was worse than the consensus of ($0.05). Revenues rose 0.5% year-over-year to $40.56 mln, in line with expectations.

BigBear.ai reported a net loss of $21.3 million for Q4 2023, which is an improvement of $8.6 million compared to a net loss of $29.9 million for Q4 2022. The company also reported positive adjusted EBITDA for the second consecutive quarter at $3.7 million. In addition, the company was cash flow positive for the first time since its public company debut in December 2021.

In addition to the Q4 earnings report, BigBear.ai also announced the successful close of the Pangiam acquisition in an all-stock transaction. This acquisition combines facial recognition, image-based anomaly detection, and advanced biometrics with BigBear.ai's computer vision capabilities. The company also announced the successful exercise of warrants, bringing additional liquidity and strengthening the balance sheet.

The company provided a revenue outlook for 2024, projecting between $195 million and $215 million. This projection includes the results of Pangiam after the acquisition date of February 29, 2024.

Overall, BigBear.ai's Q4 earnings report was a mixed bag. The company reported revenue growth and positive adjusted EBITDA, but the stock sold off due to market sentiment and the ongoing AI frenzy. The company's outlook for 2024 is promising, and investors will be watching closely to see how the company performs in the coming quarters.

Investors should wait a few days to let some of the carnage play out as anyone who bought this stock in the $3-4 range will likely unload shares on any bounce attempt. Patient investors should wait for a test of the $2 area before engaging. A rally back above the $3.80 level with momentum would change our tune.