Shares of decision intelligence specialist BigBear.ai (BBAI 8.43%) continued its amazing run on Monday, surging as much as 38.7%. As of 11:50 a.m. ET, the stock was still up 28.5%.
A check of all the usual suspects -- regulatory filings, analyst commentary, and financial reports -- revealed no company-specific news fueling the surge. This suggests the rise was due to an announcement concerning another company in the artificial intelligence (AI) space.
Riding Supermicro's coattails
Super Micro Computer, also known as Supermicro, soared Monday morning. The stock was reacting to news that the company -- which supplies specialized servers used in high-performance computing and AI -- would be joining the S&P 500. Supermicro will be replacing home appliance maker Whirlpool on the benchmark index at the beginning of trading on March 18.
The S&P 500 -- which is made up of the 500 largest market cap companies on the major indexes -- reshuffles its holdings at least quarterly, and between 20 and 25 stocks are replaced each year.
To be included in the index, companies must meet certain minimum criteria. The company must be a resident of the U.S., and the majority of its shares must be publicly traded. Furthermore, the company must have a market cap of at least $8.2 billion and have generated a profit in each of the preceding four quarters -- including the most recent one.
So, what does this have to do with BigBear.ai?
In a word, nothing. A quick look at BigBear.ai's results shows that the company itself wouldn't make the cut for inclusion in the index.
In the company's third quarter, BigBear generated net sales of $34 million, a decline of 16%. On the bright side, the company swung to a profit, with earnings per share of $0.03, marking its first quarter of positive net income. These results suggest that while BigBear.ai operates in the same field, it still has a long way to go to match Supermicro's results.
Furthermore, at 4 times forward sales, BigBear's valuation is twice that of Supermicro, which is a hefty price to pay for a company that isn't even in the same league. Between the two, Supermicro is the better buy.
