Consider Swapping Your Investment in BigBear.ai for These Potential Millionaire-Generating Stocks?
Going public through a special purpose acquisition company (SPAC) has been a wild ride for BigBear.ai (BBAI -1.49%). The AI-focused analytics tool developer opened at $9.84 in 2019, soared to a record high of $12.69 in April 2022, but then plummeted below $1 by December 2022.
Like many SPAC-backed start-ups, BigBear.ai overpromised and underdelivered. It initially claimed it could boost its revenue from $182 million in 2021 to $388 million in 2023. However, its revenue only increased from $146 million to $155 million during that period. The company blamed the slowdown on various factors, including macroeconomic headwinds, competition, and the bankruptcy of its major customer, Virgin Orbit, in 2023. Additionally, CEO Reggie Brothers stepped down in late 2022.
Despite the challenges, BigBear.ai has shown signs of stabilization under its current CEO, Mandy Long. Analysts expect the company's revenue to rise 8% in 2024, with its adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) approaching breakeven. In 2025, the revenue is forecast to climb 14% to $192.5 million, as it achieves a positive adjusted EBITDA of $4.8 million. Most of this growth should be due to new government contracts.
However, BigBear.ai's enterprise value of $1.2 billion still values it at more than 240 times this year's adjusted EBITDA. This premium valuation could limit its near-term success and prevent it from delivering millionaire-making gains. In comparison, investors might want to consider buying shares of these two potential millionaire-makers instead: Nu Holdings (NU -0.37%) and PDD Holdings (PDD 1.80%).
Nu Holdings
Nu is the largest digital bank in Latin America. As a digital-only bank, it expanded much faster than its brick-and-mortar competitors. From end-2021 to the third quarter of 2024, its total number of customers tripled to 109.7 million. Nu's active customer rate (customers divided by total customers) rose from 76% to 84% during the same period as it rolled out more services, like credit cards, lending, and investments. Additionally, its Nubank Shopping app hit 255 million visits in 2023.
Nu is leveraging artificial intelligence (AI) to bolster its customer data analysis, enhance chatbot capabilities, and fortify its cybersecurity defense. The company even introduced its own cellular service, NuCel, to draw more customers to its mobile apps. From 2021 to 2023, Nu's revenue skyrocketed at a compound annual growth rate (CAGR) of 117%. It also turned profitable on a generally accepted accounting principles (GAAP) basis in 2023.
With over 70% of Latin America's population still unbanked, Nu still has plenty of room to expand. From 2023 to 2026, analysts expect Nu's revenue and earnings per share (EPS) to grow at a CAGR of 35% and 55%, respectively. Given this momentum and a forward PE ratio of just 20, its stock has the potential to soar higher and create life-changing gains.
PDD Holdings
PDD is the third-largest e-commerce company in China in terms of annual revenue. However, it's growing far faster than its market leaders, Alibaba and JD.com. From 2018 to 2023, PDD's revenue surged at a CAGR of 80% (in Chinese renminbi terms). It turned profitable on a GAAP basis in 2021 as it cut costs and phased out lower-margin services. Its GAAP net income then grew at a CAGR of 178% from 2021 to 2023. These explosive gains were driven by PDD's discount marketplace and its online agricultural marketplace.
Those strategies helped lock in hundreds of millions of shoppers and strengthened PDD's moat against competitors. PDD then expanded internationally with Temu, which connected its merchants with overseas buyers. Temu became a threat to Amazon by evolving into one of the fastest-growing e-commerce platforms in the U.S. and other overseas markets.
From 2023 to 2026, analysts expect PDD's revenue and EPS to grow at a CAGR of 34% and 36%, respectively. Despite challenges in China's macroeconomy and fears of higher tariffs against Chinese goods, PDD's valuation is relatively attractive as it trades at just 9x 2025E earnings. If those headwinds dissipate, PDD could generate millionaire-making gains for its patient investors.
- Investors contemplating speculative plays in the finance sector might consider Nu Holdings, which has shown impressive growth with a tripled customer base and a revenue CAGR of 117% from 2021 to 2023.
- BigBear.ai's current CEO, Mandy Long, is implementing strategies to boost revenue, aiming for an 8% increase in 2024 and approaching breakeven for adjusted EBITDA, a vital step in overcoming its high enterprise value and delivering sustainable growth.
- PDD Holdings, the third-largest e-commerce company in China, has leveraged its discount marketplace and online agricultural marketplace to post explosive GAAP net income growth from 2021 to 2023 and expand internationally with Temu, showcasing potential for millionaire-making gains.
- To avoid the depreciation in value that BigBear.ai has experienced, investors could diversify their portfolio with companies like Nu Holdings, which utilizes chatbots and AI to analyze customer data and fortify cybersecurity, expanding its digital-only banking services in Latin America.
