Why BigBear.ai Stock Dropped Today

Key Points

• BigBear bragged about winning a Navy contract earlier in the week.

• The news helped push BigBear stock to its highest price in months.

• Lack of revenue growth, however, is more important to investors than just good PR.

• 10 stocks we like better than BigBear.ai ›

Shares of BigBear.ai (NYSE: BBAI), which uses artificial intelligence (AI) to help crunch large piles of data for its customers, tumbled in afternoon trading Thursday -- on no obvious news.

As of 1:55 p.m. ET, the stock is down 7.1%.

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Image source: Getty Images.

BigBear's big news

BigBear.ai calls itself "a leading provider of mission-ready AI solutions and services for defense, national security, and critical infrastructure," delivering "predictive analytics" to help users make decisions about complex data sets. As an example of its work, BigBear confirmed earlier this week that it's playing a role in the Navy's ongoing UNITAS 2025 maritime exercises, using AI tools to "improve coordination, decision-making, and threat detection in vast maritime operation zones where counter-narcotics, human trafficking, and arms smuggling are key concerns."

That news helped propel BigBear to its highest stock price since mid-July, nearly $8 per share. However, while good PR for BigBear, the company's press release didn't mention any particular revenue benefit from its role -- or make any promises that cooperation with the Navy will grow its business significantly.

Is BigBear.ai stock a buy?

This could be a problem for BigBear, which isn't living up to its billing as a growth stock. Over the past five years BigBear's grown revenue barely 1% per year, even as losses mount and cash burns down.

The good news for investors is that, with $390 million in the bank and only $113 million in debt, BigBear can continue consuming cash for more than a decade at its current burn rate (less than $28 million per year).

The bad news is that most analysts expect BigBear's cash-burn rate to accelerate rather than holding steady, and indeed nearly double over the next two years. If this is how things play out, it's probably best to be bearish on BigBear stock.

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Rich Smith has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.