Forget BigBear.ai's Low Price Tag. This Is a Better Buy Instead.

Core Viewpoint - BigBear.ai is seen as a potential investment opportunity in the defense AI sector, but comparisons to Palantir may not be justified, as investing directly in Palantir could be more beneficial for long-term investors [1][2]. Company Comparison - BigBear.ai is currently valued at approximately 22 times its expected sales for the year, while Palantir trades at 101 times its projected forward revenue, indicating a significant difference in valuation metrics [4]. - Palantir's stock is characterized by a high growth-dependent price-to-sales multiple and trades at 258 times its expected adjusted earnings, reflecting its high-risk nature but also its strong growth potential [5]. Financial Performance - BigBear.ai's revenue has declined by 20% year over year, landing at $33.1 million in the third quarter, with a gross margin of only 22.4%, which is considered alarmingly low for a software and services company [7]. - In contrast, Palantir's revenue surged by 63% year over year to reach $1.18 billion, with sales to U.S. government customers growing by 52% to $486 million, and a gross margin exceeding 82% [8]. Market Position and Competition - Despite favorable trends in defense AI spending, BigBear.ai is struggling to compete with Palantir and has not demonstrated significant new technology or service capabilities that are essential for military customers [9]. - BigBear.ai has faced challenges in securing new government contracts, and while its acquisition of Ask Sage offers some hope for future growth, it remains a risky proposition [10]. - Palantir continues to excel in the AI market, leveraging its technological advantages to maintain a competitive edge in the defense AI sector [11].