BigBear.ai (BBAI +5.07%) stock is surging higher in Thursday's trading. The software company's share price was up 17.2% as of 3 p.m. ET and had been up as much as 18.1% earlier in the session.
NYSE: BBAI
Key Data Points
BigBear.ai's valuation is rapidly climbing higher following an announcement that the company has won a new contract through the U.S. Navy. With today's gains, the stock is now up more than 130% over the last year.
BigBear.ai is rocketing higher after being awarded a Navy contract
Before the market opened this morning, BigBear.ai published a press release announcing that it had landed a new contract through the Navy's SeaPort Next Generation (SeaPort NxG) program. The contract is an indefinite delivery/indefinite quantity (IDIQ) partnership that will see BigBear.ai provide systems and process engineering along with additional technologies and support services for the Navy and other federal agencies. The contract win is the first announced under new CEO Kevin McAleenan, and investors are betting that signals a significant sales driver for the business.
What's next for BigBear.ai?
BigBear.ai has continued to rack up contract wins with defense industry customers. In conjunction with excitement surrounding artificial intelligence (AI) plays, this helped power a big rally for the stock -- and the company is now valued at roughly 5.5 times this year's expected sales.
With its third-quarter report, BigBear.ai saw sales increase roughly 22% year over year to reach $41.5 million -- and it looks like growth should accelerate in the fourth quarter. Sales were roughly flat over the previous nine months, but management expected to close out 2024 with double-digit revenue growth. The company guided for full-year sales for 2024 to come in between $165 million and $180 million, representing an annual sales increase of roughly 11.2% at the midpoint of the guidance range.
But while sales momentum looks poised to pick up, the profitability outlook continues to be a concern. The company posted a gross margin of just 25.9% in the third quarter, which is relatively low for an AI software business. The stock could soar if BigBear.ai can keep serving up revenue expansion and deliver significant improvement for gross margins, but shares look riskier on the heels of their recent rally.
