Why BigBear.ai Stock Jumped 94% in December

Shares of BigBear.ai (NYSE: BBAI) were soaring last month, as the stock gained in fits and starts over a range of news items.

The small artificial intelligence (AI)-powered software stock has gotten a lot of attention in the AI era, and it rose last month on interest in some of its peers, as well as on good news on the product front.

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According to data from S&P Global Market Intelligence, the stock finished the month up 94%. As you can see from the chart, it wasn't a smooth ascent for the stock, but its gains were strong enough to lift it nearly to a doubling.

BBAI data by YCharts

BigBear.ai makes a big move

BigBear.ai started out the month with a pop on Dec. 3, jumping 29% after the Economic Times said it could be the next Palantir Technologies. The story cited reports that the two companies have a strategic partnership that figures to benefit BigBear.ai, as Palantir was one of the biggest winners in AI last year.

After a brief pullback, the stock rose again at the end of that week on broader bullishness in the stock market.

The next significant piece of news came on Dec. 16, when the company announced a collaboration with Proof Labs to deliver an advanced cyber resiliency project for the Department of the Air Force, using AI and machine learning.

The stock jumped 18% that day and gained another 41% the following session before giving back some of those gains after the Federal Reserve trimmed its rate-cut forecast for 2025.

Finally, the company was awarded a position in the General Services Administration's OASIS+, or government suite of contracts related to procurement, showing that BigBear.ai is making progress in gaining business with the government.

At the end of the month, H.C. Wainwright raised its price target on the stock from $3 to $7 and maintained a buy rating on it, noting increasing demand for its services, and a new convertible note that removes the risk of a near-term maturity.

Image source: Getty Images.

What's next for BigBear.ai?

Heading into 2024, BigBear.ai is likely to continue to be volatile, as it was one of several small-cap AI stocks that have been bid up on hopes that it can capitalize on the AI boom. In fact, through the first week of 2025, it's already given up much of last month's gains.

The company is still not profitable on a generally accepted accounting principles (GAAP) basis, but recorded $900,000 adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) in the third quarter on $41.5 million.

Look for the company to take steps to profitability and accelerate its revenue growth if the stock is going to break out this year.

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Jeremy Bowman has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Palantir Technologies. The Motley Fool has a disclosure policy.