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Yahoo
23-06-2025
- Business
- Yahoo
BigBear.ai vs. Five9: Which AI-Driven Software Stock Is the Better Buy Now?
Artificial intelligence is transforming the software landscape, and two companies at the forefront — BBAI and Five9 FIVN — are drawing investor attention. specializes in AI-powered decision intelligence and predictive analytics primarily for government and defense applications. Meanwhile, Five9 operates in the cloud contact center software space, integrating generative AI into customer experience (CX) platforms for commercial companies are leveraging AI to solve complex problems across industries. Their innovations span from defense-grade analytics to enterprise-grade AI agents. With distinct end-markets and operating models, comparing and Five9 offers investors a timely look at two vastly different ways AI is being commercialized. One stock is striving for profitability and execution stability, while the other is already delivering margin expansion and growth dive deep and closely compare the fundamentals of the two stocks to determine which one is a better investment now. is attempting a strategic pivot toward sustainable growth under a new CEO, Kevin McAleenan. With deep roots in national security and border management, the company's core strength lies in deploying AI for critical infrastructure, defense, and homeland security applications. Its platforms like Orion, ConductorOS, and are tailored to address complex challenges in mission-critical settings, giving a defensible growth of 30% year over year to $385 million signals longer-term customer confidence, particularly with new contract wins like the Department of Defense's Orion platform and partnerships with Austal USA. Still, the near-term financial picture is troubled. While is innovating aggressively—especially through international expansion and commercial crossovers from its Pangiam security technology—the company's lumpy revenue model, non-GAAP losses, and limited commercial diversification expose investors to significant first-quarter 2025, reported revenue of $34.8 million, missing estimates and showing only 5% year-over-year growth. Its adjusted EBITDA came in at a loss of $7 million, reflecting growing R&D spend and delayed federal funding cycles. While the company ended the quarter with a much-improved $108 million in cash, up significantly from the prior quarter and the prior-year quarter, this buffer is necessary given ongoing losses and volatility in government procurement. Five9 presents a mature, scalable enterprise SaaS company capitalizing on the generative AI boom in customer experience. Its AI-powered 'Genius' platform integrates seamlessly with enterprise systems like Salesforce and ServiceNow, and provides self-service AI agents, transcription, agent assist, and intelligent routing capabilities. These solutions are increasingly mission-critical for large brands optimizing customer service with first-quarter 2025, Five9 reported revenues of $279.7 million, up 13.2% year over year and ahead of guidance. Subscription revenue, which is 80% of total revenue, rose 14% year over year, while enterprise AI revenue surged 32% year over year and now comprises 9% of enterprise subscription revenue. The company delivered record free cash flow of $34.9 million, adjusted EBITDA margin of 18.8% (up 360 basis points year over year), and EPS of 62 cents (up 29% from a year ago)—all pointing to disciplined momentum is also reflected in rising demand among Fortune 500 clients, with major wins across healthcare, financial services, and mobility. It is deepening AI adoption in its install base via its AI Blueprint program, which boasts a 50% conversion rate. Moreover, strategic partnerships with Salesforce CRM, Google Cloud, IBM watsonx and ServiceNow NOW enhance Five9's platform reach and monetization potential. The recent launch of Five9 Fusion provides native AI-powered customer experience enhancements inside Salesforce, improving sales adoption. Additionally, the ServiceNow integration enables AI-powered real-time transcription and workflow routing, while the IBM watsonx collaboration offers clients optionality in large language model selection. Despite macroeconomic headwinds and some sales cycle elongation, particularly in international markets, Five9 reaffirmed its $1.14 billion full-year revenue guidance and raised EPS guidance. Its operating leverage, robust AI-led growth engine, and expanding free cash flow place it on track to exceed the Rule of 40 metrics by 2027. stock is up 13% over the past three months, outperforming the Zacks Computer and Technology sector. However, BBAI stock is down 10.1% year to the past three months, Five9 shares are down about 13% and down 34% year to date. This slump came as investors worried about tech stocks and Five9's slowing growth rates, but the recent first-quarter beat has sparked a partial at current levels, the stock remains well below its 52-week high of $49.90. Wall Street analysts see considerable upside from here – the average price target for Five9 is about 37.6% higher than the most recent current price. Share Price Performance Image Source: Zacks Investment Research At around $4.00 per share (as of Friday), valuation isn't cheap. The company trades at about 6.59× forward 12-month trailing sales, much higher than FIVN's 1.71 ratio. At $26.85 per share, FIVN trades at roughly 1.71× trailing 12-month sales – a price-to-sales ratio that is quite low for a software company with double-digit growth. Image Source: Zacks Investment Research Earnings estimate trend for FIVN has been trending upward, whereas the market remains skeptical about BigBear's ability to translate its contract pipeline into sustained profitability. The loss estimate has widened over the past 60 days for BBAI stock. The estimated figure for FIVN's 2025 EPS reflects 11.7% growth from 2024. While BBAI is expected to report a loss of 41 cents per share, narrower than the year-ago loss of $1.10 per share. For BBAI Image Source: Zacks Investment Research For FIVN Image Source: Zacks Investment Research Both and Five9 are leveraging AI to fuel their businesses, but they occupy different ends of the risk spectrum. offers exposure to a cutting-edge, government-focused AI niche and has the potential for explosive gains if it can convert its hefty backlog into profitable growth. However, with its small size, ongoing losses, and dependence on government contract timing, stock is highly speculative and prone to big swings. The current Zacks Rank #4 (Sell) on BBAI reflects these near-term on the other hand, presents a more established growth story in the AI software space. It is already generating over a billion dollars in revenues with improving margins, and its contact-center AI solutions address a massive market. The stock's sharp decline earlier this year has left it trading at a reasonable valuation, and analysts see a meaningful upside if performance continues on its current track. Five9 carries a Zacks Rank #2 (Buy) presently, signaling upward earnings estimate revisions and a favorable outlook. You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here. Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Salesforce Inc. (CRM) : Free Stock Analysis Report ServiceNow, Inc. (NOW) : Free Stock Analysis Report Five9, Inc. (FIVN) : Free Stock Analysis Report Holdings, Inc. (BBAI) : Free Stock Analysis Report This article originally published on Zacks Investment Research ( Zacks Investment Research
Yahoo
10-06-2025
- Business
- Yahoo
Is BigBear.ai Stock a Bargain at 6.45X, or a Value Trap?
BBAI is currently trading at a 6.45X forward 12-month price-to-sales (P/S) ratio, a markdown compared to its industry, as shown below. However, that valuation remains above its three-year median of 1.9X and slightly above the Zacks Computer and Technology sector's 6.38X. BBAI Valuation Image Source: Zacks Investment Research Shares of have soared 22.7% over the past three months, outperforming the industry's 5.3% gain. That momentum reflects growing investor optimism tied to long-term defense spending and AI-driven government services. But before jumping in, it's essential to weigh whether current valuations are justified by the company's progress, and whether its operational challenges can be contained. Share Price Performance Image Source: Zacks Investment Research Let's analyze BBAI's current strengths and risks to determine if the stock warrants an investment at this stage. operates at the intersection of AI, national security, and critical infrastructure, benefiting from long-term secular tailwinds. The global security landscape continues to push governments toward greater defense spending, a trend that has helped secure contracts like its recent agreement with the U.S. Department of Defense Joint Staff J35's Orion Decision Support Platform. This deal validates its relevance in mission-critical AI defense, the company is expanding into smart supply chains and advanced manufacturing, as evidenced by its partnership with Austal USA in shipbuilding. On the international front, collaborations such as Smith Detection's integration of its AI-based threat detection systems signal early traction is also targeting high-growth adjacencies by adapting existing solutions across both federal and commercial sectors. For instance, the success of AI tools like veriScan, Trueface, and positions the company to deepen penetration in manufacturing, shipbuilding, and deployment of advanced AI systems at major U.S. airports (Dallas-Fort Worth, Denver International, LAX) reinforces the company's competitive strength in national security and critical infrastructure, and could become a template for further adoption across similar continues to expand its presence through strategic partnerships with top technology companies, solidifying the credibility and effectiveness of its AI-powered solutions. Industry leaders such as Amazon AMZN, Palantir PLTR, and Autodesk ADSK have integrated innovations into their operations, reflecting increasing enterprise adoption. Amazon Web Services (AWS) has incorporated ProModel solution into AWS ProServe, utilizing its predictive modeling and real-time analytics to enhance logistics and warehouse efficiency. In defense and intelligence, Palantir has collaborated with to bolster its AI capabilities, emphasizing the importance of technology in critical sectors. Meanwhile, Autodesk is leveraging solutions to improve its design and engineering platforms, demonstrating their value in industrial automation and complex system first-quarter 2025 results underscore compelling long-term opportunities. The company's $385 million backlog, reflecting a 30% increase year over year, highlights strong customer demand and revenue balance sheet has significantly improved. At the end of first-quarter 2025, the company reported $108 million in cash, more than doubling its cash position from year-end 2024. Meanwhile, it cut debt meaningfully by converting $58 million worth of convertible notes into equity. This improved liquidity profile gives greater breathing room to invest in growth initiatives without leaning on costly external financing. This turnaround in financial flexibility is especially important as BigBear continues to ramp R&D efforts, strengthen go-to-market partnerships, and absorb integration costs from its recent Pangiam acquisition. While these initiatives won't yield overnight profitability, the ability to fund them internally is a strategic plus in a rising-rate environment. One of the foremost risks highlighted by the company is variability in federal procurement processes, which has led to delays in funding and contract awards. While reaffirmed its full-year guidance, it acknowledged that the timing of contract execution remains volatile. This variability resulted in excess resource capacity and increased recurring SG&A expenses, which weighed on adjusted EBITDA, leading to a wider loss of $7 million compared with a loss of $1.6 million in the year-ago concern lies in the "lumpy" nature of revenue, which can fluctuate significantly based on the timing of government awards, milestone achievements, or contract completions. The relatively modest year-over-year revenue growth of 5% to $34.8 million underscores this risk, as it missed expectations by 3.2%.In addition, increased R&D spending, up by $3 million year over year, contributed to pressure on margins and cash flow, particularly since fewer projects were capitalized during the development cycle. The adjusted gross margin dipped to 28.6% from 29.1% in the prior-year quarter, reflecting these non-cash losses due to debt extinguishment and higher fair value adjustments on derivatives contributed to a substantial net loss of $62 million, even though this represented an improvement from the $127.8 million loss a year investors weigh on the company's potential in the AI space against its financial losses and operational uncertainties, the key question remains: Is this recent weakness a buying opportunity, or does more downside risk lie ahead for The Zacks Consensus Estimate for 2025 loss per share is pegged at 41 cents, which has widened from 21 cents in the past 60 days. Yet, the estimated figure indicates a narrower loss from a loss of $1.10 per share a year ago. Image Source: Zacks Investment Research While is strategically positioned in high-potential areas like AI-driven defense and critical infrastructure, its fundamentals still raise red flags for near-term investors. Despite a 22.7% jump in the past three months, the stock trades at a rich 6.45X forward 12-month P/S, above both its historical average and the broader sector's current multiple. Operational execution remains uneven, with revenue volatility, widened losses, and EBITDA deterioration all pointing to scalability company's reliance on unpredictable federal contracts, rising SG&A from idle capacity, and weak gross margins further undermines profitability visibility. Also, earnings estimates have turned sharply negative in recent months, signaling declining investor confidence. While long-term AI ambitions are credible, the current valuation seems to price in more progress than the business has delivered. Given the persistent financial drag and increased execution risks, it may be prudent for investors to lock in gains and reassess once margin and revenue consistency improve. BBAI stock currently has a Zacks Rank #4 (Sell).You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here. Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Inc. (AMZN) : Free Stock Analysis Report Autodesk, Inc. (ADSK) : Free Stock Analysis Report Palantir Technologies Inc. (PLTR) : Free Stock Analysis Report Holdings, Inc. (BBAI) : Free Stock Analysis Report This article originally published on Zacks Investment Research ( Zacks Investment Research Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
