BigBear.ai's Turbulent Ride Leaves Investors Wondering
BigBear.ai, a developer of artificial intelligence (AI)-oriented analytics tools, has been on a wild ride since its inception three years ago. After merging with a special purpose acquisition company (SPAC), the combined entity's stock opened at $9.84, reached a record high of $12.69 in April 2022, but plummeted below $1 by December 2022. The company's overpromised and underdelivered on its revenue growth projections, initially claiming it would reach $388 million in 2023, but only managing to increase from $146 million to $155 million during that period.
BigBear.ai blamed the slowdown on macroeconomic headwinds, competition, and the bankruptcy of its major customer Virgin Orbit in 2023. However, under its current CEO Mandy Long, the company has shown some signs of stabilization. Analysts expect its revenue to rise by 8% in 2024 as its adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) approaches breakeven. For 2025, they forecast a 14% increase in revenue to $192.5 million with a positive adjusted EBITDA of $4.8 million.
A significant portion of this growth is anticipated to be driven by new government contracts. Although this progress is encouraging, BigBear.ai's enterprise value of $1.2 billion still values it at more than 240 times its adjusted EBITDA for this year. This premium valuation might limit the company's near-term success and prevent it from delivering millionaire-making gains.
Nu Holdings: A Digital Bank with Explosive Growth Potential
In contrast, Nu Holdings, a digital-only bank in Latin America, has demonstrated exceptional growth since its inception. Its customer base expanded from 33.3 million at the end of 2021 to 109.7 million in the third quarter of 2024, more than tripling during this period. The activity rate (active customers divided by total customers) rose from 76% to 84%, as Nu rolled out a range of services including checking and credit cards, lending, insurance, investment, cryptocurrency, and business-oriented solutions.
The bank also tethered more retailers to its Nubank Shopping e-commerce app, which saw 255 million visits in 2023. As Nu gains more customers, it is integrating AI tools to analyze customer data, run chatbots, and enhance its cybersecurity defenses. It even launched its own cellular service, NuCel, to draw more users to its mobile apps.
Nu's revenue grew at a compound annual growth rate (CAGR) of 117% from 2021 to 2023, turning profitable on a Generally Accepted Accounting Principles (GAAP) basis in 2023. The World Bank estimates that at least 70% of Latin America's population remains unbanked, providing Nu with substantial room for expansion.
From 2023 to 2026, analysts predict Nu's revenue and earnings per share (EPS) will grow at a CAGR of 35% and 55%, respectively. Given its stunning growth rates and relatively low valuation multiple of just 20 times forward earnings, Nu Holdings has the potential to generate millionaire-making gains for its investors.
PDD Holdings: A Dominant E-commerce Player with Global Ambitions
PDD Holdings, the third-largest e-commerce company in China after Alibaba and JD.com, has demonstrated explosive growth since 2018. Its revenue grew at a CAGR of 80% (in Chinese renminbi terms) during this period, turning profitable on a GAAP basis in 2021 as it reduced costs and phased out its lower-margin first-party marketplace.
PDD's GAAP net income then surged at a CAGR of 178% from 2021 to 2023. This rapid expansion was driven by its discount marketplace, which encouraged shoppers to team up for bulk purchases, and its online agricultural marketplace, directly connecting farmers to shoppers.
Those strategies locked in hundreds of millions of shoppers and widened PDD's moat against Alibaba and JD. It then capitalized on its growth in China by expanding internationally with Temu, which connected its Chinese merchants to overseas buyers. Temu has evolved into one of the fastest-growing e-commerce platforms in the U.S. and other overseas markets.
From 2023 to 2026, analysts forecast PDD's revenue and EPS will grow at a CAGR of 34% and 36%, respectively. Given its astonishing growth rates and relatively low valuation multiple of just 8 times forward earnings, PDD Holdings has the potential to generate millionaire-making gains for its investors.
Investing in BigBear.ai: Should You Take the Risk?
Considering BigBear.ai's turbulent ride and overpromised growth projections, it might be wise to exercise caution. Before investing $1,000 in BigBear.ai, consider this: The Motley Fool's Stock Advisor analyst team identified what they believe are the 10 best stocks for investors to buy now, with BigBear.ai not making the cut.
If you're interested in these top stocks, you might be better off buying shares of Nu Holdings and PDD Holdings instead. These two companies have demonstrated exceptional growth potential and relatively low valuation multiples, providing a safer bet for millionaire-making gains.
Conclusion
BigBear.ai's rollercoaster ride has left investors wondering about the company's future prospects. While it has shown some signs of stabilization under its current CEO Mandy Long, its premium valuation and limited near-term growth make it a speculative stock. Instead of taking a chance on BigBear.ai's long-shot comeback, consider investing in Nu Holdings and PDD Holdings, two companies with explosive growth potential and relatively low valuations.
The Motley Fool Stock Advisor has identified the 10 best stocks for investors to buy now, including Nu Holdings and PDD Holdings. By following this expert advice, you might avoid losing money on a speculative stock like BigBear.ai and instead generate millionaire-making gains with these two dominant companies.