More airports are adopting Bigbear.ai’s (BBAI) facial-recognition software, and a recent acquisition by the company could meaningfully boost the attractiveness of its products.
Moreover, BBAI is likely to use its hefty cash stockpile to make additional, attractive acquisitions going forward, and its CEO’s connections in Washington could enable it to obtain many lucrative government contracts.
Nevertheless, the company’s third-quarter financial results, along with its lack of clear, powerful, positive catalysts and its high valuation, make BBAI stock unattractive at this point.
More Deals With Airports and BBAI’s Big Acquisition
On the company’s third-quarter earnings conference call, held on November 10, CEO Kevin McAleenan said, “Our Veriscan biometric platform continues to expand to additional airports and is now live at Chicago O’Hare, Seattle-Tacoma International Airport, and Nashville in support of (the U.S. Customs and Border Protection’s) Enhanced Passenger Processing Program.”
Additionally, the company’s threat-detection software, Pangiam, “completed successful trials” at Scotland’s main airport, the CEO reported.
Meanwhile, Bigbear.ai acquired AI platform provider Ask Sage for $250 million. Ask Sage’s system helps enterprises that deal with sensitive information securely utilize AI.
“With Ask Sage, (we)are positioning ourselves to deliver secure AI agents that actually act on mission data and drive outcomes at the highest classification levels,” McAleenan reported.
Ask Sage “holds the highest-level accreditation under FedRAMP, the government-wide program for authorizing cloud computing services and applications,” according to Washington Technology, and it has 100,000 users in 27 government agencies, McAleenan said.
Because Ask Sage is apparently well-trusted in Washington and likely has a multitude of contacts who hold senior positions in dozens of agencies, the acquisition could help Bigbear.ai sell many more of its own security products to the federal government.
BBAI’s Other Potential, Positive Catalysts
BBAI, which had “$457 million of cash and $258 million of held maturity securities” as of the end of Q3, is “evaluating” other potential takeover targets, McAleenan reported. The company’s acquisitions can meaningfully boost its revenue and profitability while enabling it to obtain additional customers for its current products.
Further, as I noted in a previous column, “McAleenan was Acting Secretary of the U.S. Department of Homeland Security during President Donald Trump’s first term, and he also served as Commissioner of U.S. Customs and Border Protection.” Consequently, “With the Trump administration expressing enthusiasm about AI and Defense Secretary Pete Hegseth in particular embracing the technology, BBAI should be able to leverage its connections in the government and McAleenan’s former associates in Washington to obtain many more deals going forward,” I wrote. I continue to believe that these catalysts can hep BBAI over the longer term.
Nevertheless, my research did not reveal any clear, convincing evidence that BBAI can rise above its competitors in the AI security space to generate the sort of long-term growth necessary to justify its current, high valuation.
The Negative Aspects of BBAI Stock
Last quarter, the firm’s revenue fell $8.4 million versus the same period a year earlier to $33.1 million, while its gross margin came in at 22.4%, down from 25.9% in Q3 of 2024. Even more discouragingly, BBAI, which has been hurt by Washington’s efforts to reduce the cost of its data infrastructure, predicted that its revenue would tumble by 11%-21% in all of 2025.
Despite these considerable issues, the company still has a very high price-sales ratio of 12.6 times.
The Bottom Line on BigBear.ai
Acquisitions, McAleenan’s Washington connections, and the growth of the firm’s revenue from airports could very well enable BBAI to “grow into its valuation,” propelling its stock higher.
But given the company’s revenue decline in Q3 and its high valuation, it still has to provide more evidence that it can generate considerable growth before it becomes investable.
*This article is intended to be informational only; it is not financial advice
