Why BigBear.ai Stock Roared Higher Tuesday Morning

Shares of server and storage solution specialist BigBear.ai (NYSE: BBAI) charged sharply higher on Tuesday, surging as much as 20.9%. As of 11:52 a.m. ET, the stock was still up 19.1%.

The catalyst that sent the artificial intelligence (AI) specialist higher was some bullish commentary in an international publication that compared it favorably to data mining and AI specialist Palantir Technologies (NASDAQ: PLTR).

Fierce conjecture

BigBear.ai has the potential to become the next Palantir, according to The Economic Times. Since the company is much smaller and has a much lower market cap, it has the potential to be a big winner for investors, according to the report. Indeed, with a value of just $668 million, BigBear is much smaller than Palantir at $159 billion (as of this writing).

BigBear.ai has gotten a lot of attention since the advent of generative AI early last year. The company supplies decision-intelligence solutions enhanced by AI and machine learning to help business leaders make informed decisions. If that sounds a lot like what Palantir does, there are similarities.

As my colleague Dan Victor pointed out, "Both specialize in AI and machine learning cloud-based software that helps organizations analyze complex data sets to gain predictive insights." He also cites an "ongoing strategic partnership" with Palantir that could benefit BigBear.ai.

Palantir's Artificial Intelligence Platform (AIP) is gaining broad acceptance across enterprise and government customers, noted for its ability to provide a wide range of solutions to everyday business problems. For its part, BigBear.ai is still focused on smaller, more specialized solutions, limiting its current upside.

So, is BigBear.ai the next Palantir?

To be clear, a lot of things would have to go right for BigBear to make the jump to the big leagues. In the third quarter, the company generated revenue that increased 22% to $41.5 million, resulting in a loss per share of $0.05. Compare that to Palantir's revenue of $726 million and earnings per share of $0.06, and the most obvious difference comes into focus.

However, at roughly 3 times forward sales, BigBear is by far the better bargain, compared to 46 times forward sales for Palantir. That said, its smaller size and lack of profits make BigBear.ai a more risky proposition, so any investment should be sized appropriately.

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Danny Vena has positions in Palantir Technologies. The Motley Fool has positions in and recommends Palantir Technologies. The Motley Fool has a disclosure policy.