Things Look Grim For BigBear.ai Holdings, Inc. (NYSE:BBAI) After Today's Downgrade

The latest analyst coverage could presage a bad day for BigBear.ai Holdings, Inc. (NYSE:BBAI), with the analysts making across-the-board cuts to their statutory estimates that might leave shareholders a little shell-shocked. Revenue and earnings per share (EPS) forecasts were both revised downwards, with the analysts seeing grey clouds on the horizon.

After this downgrade, BigBear.ai Holdings' three analysts are now forecasting revenues of US$153m in 2022. This would be an okay 3.7% improvement in sales compared to the last 12 months. The loss per share is anticipated to greatly reduce in the near future, narrowing 48% to US$0.79. However, before this estimates update, the consensus had been expecting revenues of US$183m and US$0.33 per share in losses. So there's been quite a change-up of views after the recent consensus updates, with the analysts making a serious cut to their revenue forecasts while also expecting losses per share to increase.

Check out our latest analysis for BigBear.ai Holdings

The consensus price target fell 26% to US$9.75, implicitly signalling that lower earnings per share are a leading indicator for BigBear.ai Holdings' valuation. The consensus price target is just an average of individual analyst targets, so - it could be handy to see how wide the range of underlying estimates is. Currently, the most bullish analyst values BigBear.ai Holdings at US$12.50 per share, while the most bearish prices it at US$7.00. This shows there is still some diversity in estimates, but analysts don't appear to be totally split on the stock as though it might be a success or failure situation.

These estimates are interesting, but it can be useful to paint some more broad strokes when seeing how forecasts compare, both to the BigBear.ai Holdings' past performance and to peers in the same industry. It's pretty clear that there is an expectation that BigBear.ai Holdings' revenue growth will slow down substantially, with revenues to the end of 2022 expected to display 7.6% growth on an annualised basis. This is compared to a historical growth rate of 19% over the past year. By way of comparison, the other companies in this industry with analyst coverage are forecast to grow their revenue at 12% per year. Factoring in the forecast slowdown in growth, it seems obvious that BigBear.ai Holdings is also expected to grow slower than other industry participants.

The Bottom Line

The most important thing to take away is that analysts increased their loss per share estimates for this year. Unfortunately analysts also downgraded their revenue estimates, and industry data suggests that BigBear.ai Holdings' revenues are expected to grow slower than the wider market. After such a stark change in sentiment from analysts, we'd understand if readers now felt a bit wary of BigBear.ai Holdings.

Even so, the longer term trajectory of the business is much more important for the value creation of shareholders. We have estimates - from multiple BigBear.ai Holdings analysts - going out to 2023, and you can see them free on our platform here.

Another way to search for interesting companies that could be reaching an inflection point is to track whether management are buying or selling, with our free list of growing companies that insiders are buying.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.