BigBear.ai Sank Today -- Is the Stock a Buy Right Now?

Key Points

• BigBear.ai stock lost ground to the broader market today in conjunction with bearish trading.

• Investors are reacting to comments from Federal Reserve chair Jerome Powell that stocks look highly valued.

• 10 stocks we like better than BigBear.ai ›

BigBear.ai (NYSE: BBAI) stock closed out Thursday's trading squarely in the red. The company's share price fell 6% in the session amid the backdrop of a 0.5% decline for both the S&P 500 (SNPINDEX: ^GSPC) and the Nasdaq Composite (NASDAQINDEX: ^IXIC).

The stock market saw a day of bearish trading today as investors honed in on valuation-related risk factors. While the market has seen gains in conjunction with recent moves from the Federal Reserve to cut benchmark interest rates, Fed chair Jerome Powell recently indicated that the stock market appears to be relatively highly valued.

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Is BigBear.ai stock a buy right now?

BigBear.ai's valuation pullback today doesn't appear to be tied to any new business-specific developments for the company. Pullbacks like these can sometimes be good buying opportunities, but each situation should be judged on its individual merits.

Despite today's pullback, BigBear.ai stock is still up roughly 13% over the last week and approximately 60% year to date. The gains have largely been driven by investors betting on artificial intelligence (AI) players with exposure to the defense industry. Meanwhile, BigBear.ai's near-term performance outlook has actually gotten materially weaker -- with the company issuing major downward revisions for its sales outlook.

On the heels of the company's last quarterly report, it's not clear that the business is actually scoring big wins in conjunction with broader demand connected to AI trends. While it's possible that BigBear.ai could go on to score major new contracts and return to posting significant sales growth, the business's current fundamentals don't look strong enough to make the stock a screaming buy, even with today's pullback. In light of recent concerns that stocks are broadly at risk of being overvalued right now, it looks like a better move to focus on higher-quality players in the AI space.

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Keith Noonan 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.