Is BigBear.ai Stock Going to $7? 1 Wall Street Analyst Thinks So.

One of the more assertive analyst price target raises happened at nearly the end of 2024. The affected company was artificial intelligence (AI) specialist BigBear.ai (NYSE: BBAI), which popped to a more than one-year high on the news. Is that fresh burst of optimism justified?

A double and then some

Before market open on Monday, H.C. Wainwright's Scott Buck raised his fair value assessment of BigBear.ai shares to $7 apiece. The new level is more than double the previous $3 price target. Not surprisingly, Buck retained his buy recommendation on the ambitious AI company.

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The analyst is particularly impressed by BigBear.ai's ability to draw revenue from a diverse range of clients, according to reports. One entity the company is doing business with is the U.S. federal government -- quite the reliable partner -- by participating in a project with the General Services Administration.

Even though the company's stock has been on a bull run since management unveiled third-quarter results at the beginning of November, the Wainwright pundit strongly feels it has plenty more runway. After all, it's operating in a tech sector segment that continues to be extremely popular among investors, given its clearly vast potential.

Paying up for popularity

While I don't doubt the potential of AI as a business, I feel that BigBear.ai is becoming quite richly valued. But that's what happens with hot segments; investors rush in on even the slightest hint of good news. That said, management seems to be making sensible moves and it's clearly effective at gaining (and retaining) major clients. As such, it's probably worth considering as a buy, but investors should be prepared for a bumpy ride.

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Eric Volkman has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.