BigBear.ai Holdings (BBAI -22.86%) stock collapsed in a 24% rout (through 10:35 a.m. ET) this morning after missing badly on both the top and bottom lines last night.
Heading into the company's fourth-quarter 2024 earnings report, analysts forecast BigBear.ai would lose $0.14 per share on $54.6 million in sales. In fact, the company's loss was three times larger -- $0.43 per share -- and its sales were considerably smaller than expected: $43.8 million.
The provider of artificial intelligence (AI)-powered data analytics boasted that it "demonstrated momentum through major contract wins, expanding our backlog and growing our pipeline, maturing our technology portfolio." BigBear.ai also expanded its gross profit margin by 530 basis points to 37.4%.
However, high and rising operating costs, plus "non-cash changes in fair value of $93.3 million from derivative liabilities" on the company's convertible debt and stock warrants, nonetheless pushed the company into a big net loss for the quarter -- $108 million, about 5 times the loss incurred in Q4 2023.
Granted, the non-cash charges are probably one-time in nature. Still, for a supposed growth stock, BigBear.ai's sales growth of only 8% year over year failed to impress in Q4. When research and development costs are rising 15%, and selling, general, and administrative costs rise 21%, but your sales grow only 8%...well, let's just say it doesn't look much like BigBear.ai is on a path to turn profitable anytime soon.
Speaking of the future, BigBear.ai forecasts $160 million to $180 million in full-year 2025 sales, which is well short of the Street's forecast of $193.9 million. BigBear.ai management also made no promise that its sales would be profitable. In fact, even "adjusted EBITDA" (meaning before interest, taxes, depreciation, and amortization), says BigBear.ai, will be negative this year. And when even that forgiving metric is negative, it's a virtual certainty that the company will earn no generally accepted accounting principles (GAAP) profit.
With growth slowing and profits seemingly far off and getting farther as costs outrun revenue growth, I'm afraid the only logical conclusion here is that BigBear.ai stock is a sell.
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