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Artificial intelligence (AI), once a futuristic concept, now commands boardrooms and budgets. With AI expenditures swelling to unprecedented levels, companies are using its capabilities to deliver record profits to shareholders.
Amid this upheaval, brokerage firm Wedbush believes that software firms Palantir Technologies Inc. (PLTR) and Salesforce, Inc. (CRM) are poised to spearhead the monetization race heading into 2025.
Wedbush analysts, helmed by Daniel Ives, laud Palantir’s generative AI prowess and its burgeoning enterprise ecosystem, dubbing it a cornerstone of the ongoing AI revolution. Simultaneously, they believe Salesforce’s Agentforce 2.0 is redefining digital labor, promising automation with unparalleled precision and trust.
With both stocks eclipsing broader market returns, investors could consider buying these stocks to seize this transformative trend in 2025, despite their lofty valuations.
AI Stock #1: Palantir Technologies
Founded in 2003 and headquartered in Denver, Colorado, Palantir Technologies Inc. (PLTR) is a formidable force in the AI landscape. With a mission to combat terrorism, thwart crime, and empower organizations to sift through colossal amounts of data, Palantir’s suite of tools - Gotham, Apollo, and Foundry - are engineered for precision. The company’s far-reaching operations span North America, Europe, the Middle East, and Asia, cementing its global presence.
Valued at a market capitalization of $172.3 billion, PLTR stock has turned heads with its meteoric rise. Over the past year, the stock skyrocketed 380%, cementing its status as a market standout. The momentum reached a crescendo on Dec. 24, when PLTR hit its 52-week high of $84.80, a fitting holiday gift for investors.
Yet, the stock’s meteoric rise comes with a lofty price tag. Palantir trades at a staggering 372.59 times forward earnings and 79.02 times sales - well beyond both the sector average and its historical benchmarks. Although elevated, these figures underscore strong investor confidence and belief in the company’s transformative growth potential.
PLTR stock soared 23.5% in the subsequent trading session after it dazzled investors with stellar third-quarter earnings results on Nov. 4 after the bell. Revenue surged 30% year-over-year to $725.5 million, outpacing expectations. Adjusted earnings grew even faster, rising 42.9% to $0.10 per share, also beating estimates.
U.S. government revenue climbed 40% to $320 million, while U.S. commercial revenue jumped 54% to $179 million, reflecting balanced growth. The company also achieved profitability under GAAP standards, earning $144 million in net income and generating over $1 billion in free cash flow over the past year.
Central to Palantir’s growth is its AI platform (AIP), empowering customers to deploy AI models for operational efficiency. AIP's traction has boosted the customer base by 39% to 629 customers in Q3, with significant deals signed — 104 deals exceeded $1 million, including 16 worth $10 million or more. This boosted its remaining performance obligations (RPOs) by 59% to $1.6 billion, which outpaced revenue growth. This signals a promising future, with most RPOs tied to commercial contracts. Meanwhile, Palantir’s remaining deal value (RDV) rose 22% annually to $4.5 billion, highlighting a robust contract pipeline poised to sustain long-term growth.
Riding the momentum of its robust performance, Palantir has raised its 2024 revenue forecast to exceed $2.8 billion, slightly above earlier estimates. This revision points to annual growth of nearly 26%, a significant leap from the 17% growth achieved in 2023. For fiscal Q4, Palantir expects revenues between $767 million and $771 million, with adjusted income from operations projected at $298 million to $302 million.
Analysts tracking the company anticipate its profit to surge 162.5% year over year to $0.21 per share in fiscal 2024, with another 42.9% boost to $0.30 per share projected for fiscal 2025.
Analysts are divided on the PLTR stock trajectory, but one theme dominates - its potential in the AI arena. Baird’s Yanni Samoilis initiated coverage with a $70 target, lauding Palantir’s AI leadership while cautioning on its valuation and revenue concentration, with top clients contributing 18% of 2023 revenues. Samoilis also warned of potential volatility in government contracts as President-elect Donald Trump prepares to take office.
Meanwhile, UBS analyst Karl Keirstead, assigning a Street-high $80 target - suggesting 6.4% upside potential - and a “Hold” rating, admires Palantir’s financial strength and AI prowess but deems its valuation “tough to get over.”
Wedbush analyst Daniel Ives struck a more optimistic tone, dubbing Palantir the “Messi of AI.” With a $75 price target and a “Buy” rating, Ives sees Palantir expanding its pipeline and delivering transformative AI-driven solutions across industries.
Despite the achievements, Wall Street remains wary of its lofty valuation, viewing the stock as a “Hold.” Among the 17 analysts covering the stock, two recommend a “Strong Buy,” eight analysts advise a “Hold,” two rate it as a “Moderate Sell,” and five firmly back a “Strong Sell” rating.
The average price target of $42.80 trails Palantir’s current highs, reflecting doubt over its lofty valuation. Yet, investor enthusiasm persists, fueled by its S&P 500 Index ($SPX) and Nasdaq-100 Index ($IUXX) inclusion, often a catalyst for further gains.
AI Stock #2: Salesforce
Incorporated in 1999, San Francisco-headquartered Salesforce, Inc. (CRM), with a market cap of $316.4 billion, has ascended to the pinnacle of customer relationship management (CRM) software. Its cloud-based platform revolutionizes how businesses connect with customers, offering cutting-edge tools across sales, service, marketing, and commerce.
With a strong foothold in data analytics and AI, Salesforce enables seamless customer interactions at scale. Strategic acquisitions, like Slack, and partnerships with tech giants like International Business Machines (IBM) underscore its relentless drive for innovation.
After peaking at a new record high of $369 on Dec. 4 after its Q3 earnings release, CRM shares have lost about 10.4% of their value. Yet, the stock returned 29.1% over the past 52 weeks.
CRM is no bargain, priced at 44.90x forward adjusted earnings and 9.18x sales, above the tech sector median. Still, it's a steal compared to its historical forward P/E ratio.
Salesforce declared its first-ever dividend in February last year, offering $0.40 per share, which remains unchanged as of December. The quarterly payout translates to an annualized $1.60 per share with a 0.48% yield and a modest payout ratio of 15.87%. In Q3, the company returned $1.2 billion through share repurchases and $382 million in dividends, totaling $1.6 billion in cash returned to stockholders.
Salesforce’s Q3 fiscal 2025 earnings results on Dec. 3 were a mixed bag. While revenues hit $9.44 billion, surpassing expectations with 8.3% year-over-year growth, adjusted EPS rose 14.2% to $2.41, falling short of estimates. Despite this, the company raised its full-year revenue forecast, lifting investor sentiment and pushing CRM stock up 11% in the following session.
Salesforce’s Q3 was driven by a surge in AI deals, with wins surpassing $1 million tripling annually and over 2,000 AI deals signed. Among them, over 200 were for Agentforce, fueling growth across its global partner ecosystem, with 80,000 system integrators trained.
Meanwhile, international markets are fueling Salesforce’s growth, driving half of its top 10 Q3 wins. New channels like Agentforce and AWS Marketplace are boosting revenue, with AWS transactions doubling sequentially.
Salesforce is eyeing Q4 revenue between $9.9 billion and $10.1 billion, reflecting solid annual growth. Adjusted EPS is expected between $2.57 and $2.62. For fiscal 2025, it raised its sales forecast to $38 billion, aligning with analyst expectations. With AI-driven innovations like Agentforce, Salesforce is positioned to dominate the enterprise AI landscape, driving significant growth despite mixed Q3 results and cautious Q4 EPS guidance.
Analysts tracking Salesforce predict EPS of $7.48 in fiscal 2025, up 23.4% annually, with the bottom line projected to rise another 12% to $8.38 in fiscal 2026.
Salesforce’s AI-first pivot is paying off, with Agentforce leading the charge. Wedbush sees the company well-positioned for AI monetization in 2025, expecting shares to rise by up to $80 in the next 12 to 18 months.
Ives highlights Agentforce 2.0’s potential to revolutionize digital labor, enabling AI to handle advanced tasks with increased trust layers, reducing costs and boosting automation.
Wall Street’s confidence is soaring, with CRM upgraded from “Moderate Buy” to a “Strong Buy” rating overall, a testament to its AI-powered momentum. Among the 45 analysts covering the stock, 32 are highly bullish with a “Strong Buy,” three advise a “Moderate Buy,” nine suggest a “Hold,” and one has a “Strong Sell.”
The average analyst price target of $399.02 indicates potential upside of 20.7% from the current price levels. However, the Street-high target of $450 suggests that the stock could surge as much as 36.1%.
