Why BigBear.ai Stock Is Gaining Despite Huge Volatility Today

BigBear.ai (NYSE: BBAI) has been in highly volatile in Monday's trading, but it's currently posting gains in the session. The company's share price was up 2.1% as of 3:15 p.m. ET and had been up as much as 12.9% earlier in the day. The stock had also been down as much as 4.5% in the trading session.

The stock saw big gains last week connected to new contract wins. Today, it's gaining in conjunction with an artificial intelligence (AI) summit hosted in Paris and bullish momentum for the broader market. But the stock saw also pulled back after investors weighed a recently published article that warned about the company's business and valuation cycles.

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BigBear.ai stock is up despite huge swings today

Tech leaders and government officials participated in an AI summit in France's capital today, and news from the event helped power positive momentum for BigBear.ai and other artificial intelligence stocks. In general, commentary from the event seemed to suggest that European countries would be shifting to reduce regulatory standards governing AI. The pivot is intended to promote innovation and growth in the category and is seen as a beneficial development for tech companies with exposure to the European Union.

But despite opening the day's trading with big gains, BigBear.ai stock briefly saw a big pullback in conjunction with an article published by investment analyst Oliver Rodzianko on TipRanks. In his article, Rodzianko warned about the "boom and bust cycle" of BigBear.ai's business and cautioned that the company's valuation may have become overinflated. The Economic Times then published an article echoing Rodzianko's sentiments, which intensified the sell-off, but BigBear.ai recovered and has bounced back to being in the green today.

What comes next for BigBear.ai?

With today's gains, BigBear.ai stock is up 378% over the last year. The company now has a market capitalization of roughly $2.2 billion and is valued at roughly 11.4 times this year's expected sales.

BBAI PS Ratio (Forward) data by YCharts

BigBear.ai's share price has seen huge gains recently in conjunction with Kevin McAleenan replacing Mandy Long as CEO and subsequent contract wins with the U.S. Navy and the Department of Defense's Chief Digital and Artificial Intelligence Office.

While McAleenan's experience working with government agencies and connection to the previous Trump administration could help the company continue to win new contracts, BigBear.ai will need to make big improvements to its gross margin if it hopes to shift into profitability in the next several years. While the stock could continue rocketing higher, shares look risky at current prices.

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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.