The popularity of OpenAI’s ChatGPT and its rapid adoption has led to a rally in AI (Artificial Intelligence)-related stocks, including BigBear.ai Holdings (NYSE:BBAI). This penny stock has skyrocketed over 364% year-to-date. While its stock price gained substantially, its growth rate failed to impress, implying that the rally may not last in BBAI stock.
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The company’s management highlighted that the market for AI/ML (Machine Learning) augmented analytics solutions is growing fast and offering solid growth opportunities ahead. At the same time, the company’s strong backlogs and large deals provide secure future growth.
While management remains upbeat, the 2023 outlook indicates that BBAI’s top line could stay flat or increase by 10% compared to 2022, which fails to impress.
BBAI recently reported in-line sales and EBITDA for Q4. However, its full-year revenue outlook came in below Street’s estimates. The company expects its 2023 revenues to be in the range of $155 million to $170 million, lower than the analysts’ forecast of $173 million.
While BBAI’s revenue outlook disappoints, let’s check what’s ahead for the company, as its stock price has gained quite a lot.
What’s the Prediction for BBAI Stock?
Thanks to the recent rally, BBAI stock is trading at a premium. Louie DiPalma of William Blair highlighted that BBAI stock is trading at 2.7 times his 2024 revenue estimate. This is higher than the peer group average of 1.5.
Suri expects the BBAI stock to remain range-bound due to its premium valuation. He added that BBAI’s valuation multiple could compress if the company fails to expand its gross margin substantially. The analyst recommends a Hold on BBAI and has not provided a price target.
While Suri remains sidelined on BBAI stock, it has received a Buy recommendation from Northland Securities. Moreover, Northland has a price target of $4.50 on BBAI stock, implying a further upside potential of 43.77%.
Bottom Line
BBAI’s premium valuation and not-so-impressive sales growth forecast could restrict the upside in the short term. Meanwhile, investors can leverage our Penny Stocks Screener to find attractive stocks more likely to beat the broader markets.
