Steve Hou
Head of Research at Silicon Data, AI Compute Markets
Babcock & Wilcox fits an earnings inflection strategy: a terrible company unmistakably becoming less terrible. The strategy works even better with good forecasts before fundamentals visibly improve, and goes on steroids when a company recently flirted with bankruptcy but survived, as Carvana did at $3 in 2023. x.com x.comÂ
Babcock & Wilcox is a $2B energy and power infrastructure turnaround backed by a $2.4B AI data center deal and a $12B pipeline. Revenue is set to scale from $580M in 2025 to $1.6B by 2028 as EBITDA and free cash flow turn positive and debt declines. The stock is breaking out of an eight-year base with strong relative strength and heavy accumulation, an emerging small-cap leader. x.comÂ
Babcock & Wilcox looks less bullish because data-center margins have come in far below expectations and parts growth stalled. Revenue beat as the Base Electron contract ramped faster than projected, and another 1 GW data-center deal is close, with one or two more a good bet. But revenue rose almost $180M while EBITDA rose only about $8M, under 5% incremental margins, and Base Electron margins trail the 10-12% estimate. This may overreact to one quarter, but other ideas are less uncertain. x.comÂ
Bakkt's history of pivots, reverse splits and dilution makes it far likelier to go to zero than to become a legendary multibagger. Through each iteration, investors are assured this time is different and it is a whole new company. Occasionally such companies pull it off, but usually they do not. x.comÂ
