We recently compiled a list of the 10 Best Performing IT Services Stocks to Buy According to Analysts. In this article, we are going to take a look at where BigBear.ai Holdings, Inc. (NYSE:BBAI) stands against the other IT services stocks.
According to research firm Statista, the IT Services industry encompasses a broad range of services and products designed to help organizations manage and optimize their information and business processes. This industry includes managed services, security services, data management, consulting, and cloud computing, all of which play a critical role in today’s digital economy.
As businesses seek greater efficiency and smarter decision-making, IT service providers are increasingly integrating AI-driven solutions into their offerings. A mid-2024 Statista report projects that the IT Services market will generate $1.5 trillion in revenue by 2025, reflecting significant growth. Within this market, IT Outsourcing is expected to dominate, with a projected market size of $591 billion in the same year. Additionally, companies are accelerating their digital transformation initiatives to stay competitive, driving demand for IT consulting and implementation services. Statista forecasts this segment to reach $79 billion in 2025 and expand further to $93 billion by 2029, growing at a CAGR of 4.2% over the period.
The S&P 500 IT Services Index has experienced volatility compared to the broader S&P 500 benchmark index. Over the past 1-year, the IT Services sector has underperformed (8.4% return vs. 16.8% for the benchmark). However, over a three-year horizon, it has outperformed, highlighting the sector’s long-term resilience. While it may not generate the same excitement as semiconductors or software, IT Services remain closely linked to overall technology growth and continue to deliver steady returns.
IT service providers play a pivotal role in helping businesses streamline operations, enhance customer experiences, and maintain a competitive edge in an increasingly digital landscape. Organizations are also relying more on external expertise to navigate complex technological challenges, further boosting demand for IT services.
Our Methodology
To determine the 10 best performing IT services stocks to buy according to analysts, we began by screening all U.S.-listed IT Services companies with a market capitalization above $300 million, to eliminate smaller and more volatile stocks. Next, we sorted the companies based on their year-to-date (YTD) returns. Further, we selected companies which have a potential upside of 10% or more. Finally, we ranked the top 10 stocks based on YTD returns, placing the highest-performing ones at the top. Additionally, we also included data on hedge fund holdings in these companies as of Q4 2024 to provide further insight into investor interest.
Note: All pricing data is as of market close on February 28.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 373.4% since May 2014, beating its benchmark by 218 percentage points (see more details here).
A closeup of a computer server rack surrounded by a CAT5 network of cables.
BigBear.ai Holdings, Inc. (NYSE:BBAI)
YTD returns: 16%
Potential Upside: 45%
Number of Hedge Fund Holders: 13
BigBear.ai Holdings, Inc. (NYSE:BBAI) specializes in edge AI-powered decision intelligence solutions, catering to national security, supply chain management, and digital identity applications.
The company’s share price doubled within a week starting February 4 after securing a contract from the Department of Defense (DoD) Chief Digital and Artificial Intelligence Office (CDAO). This contract aims to enhance BigBear.ai Holdings Inc. (NYSE:BBAI)’s Virtual Anticipation Network (VANE) prototype, designed to improve the assessment of news media originating from countries that may pose foreign threats. The contract win reinforced the company’s technological capabilities and strengthened its investment appeal.
Following this development, analysts at Cantor Fitzgerald raised their price target from $3.50 to $8, citing recent contract wins and strategic shifts that enhance the stock’s attractiveness.
Although the stock has since retraced much of its gains, bringing its year-to-date increase to 16% as of February 28, analysts remain optimistic about further upside. The consensus average price target currently stands at $7.50, suggesting a potential gain of 45%.
Overall BBAI ranks 4th on our list of the best performing IT services stocks according to analysts. While we acknowledge the potential of BBAI as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than BBAI but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
READ NEXT: 20 Best AI Stocks To Buy Now and Complete List of 59 AI Companies Under $2 Billion in Market Cap.
Disclosure: None. This article is originally published at Insider Monkey.
