Why BigBear.ai Stock Plummeted 21.4% Last Month and Is Falling in March
Key Points
BigBear.ai as investors sold out of tech stocks in February.
AI disruption concerns and macroeconomic pressures drove sell-offs in the month.
BigBear.ai stock published its Q4 results early in March, and the stock is down in the month.
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After a big sell-off in January, BigBear.ai (NYSE: BBAI) stock got hit with another big pullback in February's trading. The company's share price sank 21.4% in the month.
BigBear.ai's valuation headed lower last month amid a bearish backdrop for tech stocks. The S&P 500 fell 0.9%, and the Nasdaq Composite declined 3.4%.
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BigBear.ai's valuation fell as investors moved out of tech bets
February was a tough month for tech stocks, with investors betting that artificial-intelligence (AI) technologies would disrupt many software businesses. Macroeconomic uncertainty spurred by the Supreme Court's ruling striking down many of President Donald Trump's tariffs and subsequent moves by the Trump administration to reinstate tariffs also jostled the market, and a hotter-than-expected producer-price-index (PPI) report drove another big sell-off at the end of the month.
While BigBear.ai has long traded at a relatively low price-to-sales multiple for a company with exposure to defense tech trends, the company's performance has suggested it is falling behind in the AI race. With that apparent competitive dynamic, the stock suffered a big pullback in February as investors moved out of companies that could get left behind as AI disruption accelerates.
BigBear.ai stock has kept sliding in March
As of this writing, BigBear.ai is down 1% in March. Sell-offs might have been worse if escalation for the U.S. and Israeli's conflict with Iran didn't provide valuation support for defense stocks.
BigBear.ai published its fourth-quarter and full-year results after the market closed on March 2. While the company's per-share loss of $0.01 beat the average analyst estimate by $0.05 per share, sales of $27.3 million in the period fell $6 million short of Wall Street's target. Revenue was down 37.7% year over year in Q4 and 19% for the full-year period.
The company targeted sales between $135 million $155 million for this year -- representing annual growth of roughly 17% at the midpoint of the guidance range. On the other hand, the outlook includes contributions from BigBear.ai's acquisitions of Ask Sage and CargoSeer.
While BigBear.ai is heavily focused on the defense industry, there has been little indication that the company is winning business in line with recent ramping for defense-tech spending. The U.S. government has been signing contracts with AI service providers and innovation-focused defense players, but BigBear's recent sales momentum suggests that the company's current product-and-service portfolio hasn't been enough to win big deals at a sustainable rate. Along with weak margins for the core business, this puts a lot of pressure on the company's recent acquisitions to turn things around.
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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.
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