BigBear.ai (NYSE:BBAI) stock is popping more than up 15% on Tuesday. Undergirding sentiment is H.C. Wainwright’s initiation of coverage of BBAI stock, with analysts rating shares a “buy.” Analysts also assigned the stock a $4 price target, implying a near tripling from Monday’s close. Still, while BigBear carries a lot of growth potential, it remains a speculative bet.
According to Seeking Alpha, H.C. Wainwright believes that BigBear — which specializes in artificial intelligence () and machine learning ( ) — will address the needs of “three primary markets.” These are supply chains and logistics, cybersecurity and autonomous systems.
Further, BigBear’s existing backlog surpasses $206 million, which strongly implies superior positioning in its field. This backlog is also comprised of “recognized commercial and government entities,” underlying the trust that major institutions have for BigBear.
Given the attractive backdrop for BBAI stock, H.C. Wainwright analysts believe that investors should “accumulate BBAI shares ahead of an acceleration in revenue growth in 2024 and more defined path to profitability.”
BBAI Stock Enjoys Credibility But Also Presents Risks
According to research firm Gartner, digital intelligence experts project that the AI analytics market may reach $238.5 billion by 2025, representing a compound annual growth rate (CAGR) of 22.5% from 2020. Fundamentally, such an outlook offers potentially massive upside for BBAI stock. Keep in mind that, as of this writing, the company carries a market capitalization of only around $250 million.
On top of that, an analysis by Cybersecurity Ventures predicts that global cybercrime costs will reach $10.5 trillion by 2025. With nefarious online activity becoming more sophisticated alongside the growth in tech, it’s vital for enterprises to maintain relevant countermeasures. Naturally, BigBear could offer a viable answer to this, given its expertise.
And it’s not just glitzy marketing rhetoric. Recently, BigBear inked a contract with aerospace and defense firm L3Harris Technologies (NYSE:LHX) to “deliver advanced autonomous surface vessel capabilities.” As word of mouth travels among these big players, BBAI stock could blossom.
Still, it’s a risky narrative. On one hand, BBAI stock has gained more than 100% since the start of the year. However, in the trailing six months, shares are actually down by more than 40%. Since its public market debut — which came about via a merger with a special purpose acquisition company (SPAC) — BBAI has also hemorrhaged 83% of market value.
Why It Matters
Forwarding the double-edged-sword theme, Seeking Alpha’s Quant Rating system assesses BBAI stock as a “strong sell.” On TipRanks, however, analysts peg shares as a consensus moderate buy with a $4.50 price target, implying about 180% upside potential.
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On the date of publication, Josh Enomoto did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.