Key Points

• BigBear.ai posted double-digit growth last quarter.

• Its growth, however, hasn’t been consistent.

• The company continues to incur losses, raising concerns about whether it has a path to profitability.

• 10 stocks we like better than BigBear.ai ›

Shares of tech company BigBear.ai (NYSE:BBAI) have been nosediving this year. As of the end of last week, they were trading below $3 per share, representing a year-to-date decline of 46%. The data analytics company, which has been seen by some as the next potential Palantir Technologies, has been anything but a top growth stock to own.

While there may still be hope that the company turns things around in the future, there is also, undoubtedly, plenty of risk with investing in the business today. Has BigBear.ai stock become so cheap that it’s finally worth buying, despite its risks? Let’s take a closer look.

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Why has BigBear.ai stock been struggling so badly?

Although BigBear.ai has close relationships with the government and there can sometimes appear to be similarities with Palantir, there are also considerable differences. Its growth, for instance, has been choppy. While revenue has been rising, there have been periods of decline. Its growth rate has often been underwhelming, for a growth stock, anyway. During its most recent quarter, which ended on June 30, its revenue was up a modest 13%, totaling $36.7 million. A year earlier, in the same period, however, its revenue had declined by more than 18%.

Meanwhile, the company has continued to post small gross margins and incur losses. BigBear.ai’s lack of consistent growth and inability to stay out of the red have given investors plenty of reasons to be cautious with the tech stock, as it hasn’t proven to be a sure thing.

However, investors may still be considering the stock given its low valuation, because amid such a decline, it may be tempting to buy the badly beaten-down stock, believing that it may not end up going much lower. But is that really the case?

Why I wouldn’t gamble on BigBear.ai stock

At $1.4 billion in market cap, BigBear.ai isn’t the largest artificial intelligence stock to own by any stretch. It’s fairly small, especially given the opportunities it possesses. There is, however, also plenty of competition in the space and other companies, including Palantir, which could end up taking business from BigBear.ai.

Without a strong competitive advantage or even a compelling catalyst to convince investors that the business is on the right track, there’s little reason to expect things to get any better for BigBear.ai in the near term or even the long run. Its troubling financials and lack of strong growth make it a risky investment; it’s a stock I’d steer clear of as it can still go far lower.

Should you buy stock in BigBear.ai right now?

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David Jagielski, CPA has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Palantir Technologies. The Motley Fool has a disclosure policy.