On Friday, H.C. Wainwright adjusted its outlook on BigBear.ai Holdings (NYSE:BBAI), raising the shares price target to $5.00 from the previous $4.00, while maintaining a Buy rating on the stock. The firm's decision followed BigBear.ai's announcement of its fourth-quarter earnings for 2023, which were released after the market closed on Thursday.
BigBear.ai reported fourth-quarter revenue of $40.6 million, falling short of the $42.6 million consensus estimate. However, the company's full-year revenue remained within its guided range of $155.0 million to $170.0 million. Despite flat revenue in 2023, which may not meet some investors' expectations, the company demonstrated improvements in gross margin and disciplined operating expenses compared to the previous year.
Looking forward, BigBear.ai's management provided guidance for 2024, forecasting revenue to be between $195.0 million and $215.0 million. This projection suggests a high single-digit organic growth rate at the midpoint. The anticipated increase in revenue is expected to be supported by both the acquisition of Pangiam and a resurgence in organic growth.
The firm highlighted that BigBear.ai's improved revenue growth trajectory is set to coincide with continued expense discipline and rising gross margins, which should contribute to operating leverage. As the company scales and near-term operating results are used to project future cash flows, valuation multiples are anticipated to align more closely with those of high-quality AI industry peers.
While acknowledging that some integration challenges may arise over the next six months due to the recent acquisition, H.C. Wainwright recommended that investors accumulate shares of BigBear.ai in anticipation of stronger operating performance and enhanced business momentum heading into 2025. The firm's renewed confidence in the company's prospects is reflected in the increased price target.
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