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Palantir Technologies (PLTR), the data analytics and artificial intelligence (AI) software powerhouse, has been generating some buzz lately. With its AI protocol business growing at a rate of nearly 40% over the past year, the stock's fans are starting to argue that the time has come for Palantir to win its due respect on Wall Street.
According to Kyle Wool, CEO of Dominari Financial, Palantir's growth trajectory is finally starting to gain some momentum. In a recent appearance on Fox Business, Wool didn't mince words, stating that he "wouldn't be surprised if we finally see Palantir break out."
And why would he be? With Big Tech companies investing capital into AI like there's no tomorrow, Palantir looks perfectly positioned to ride this wave of investment. But the question on everyone's mind is - will Palantir's stock finally take off as the company proves it can turn AI into cash, or will the stock continue to face hurdles on its path to sustained growth?
Let's take a closer look at this company and see what it has to offer. After all, with the AI sector warming up faster than a summer day in Denver, Palantir could be the next big breakout story – unless it's already overheated.
Palantir's Stock Rally
PLTR has been turning heads lately with its stock performance. Over the past year, the shares have soared an impressive 58.8%, leaving the S&P 500 Index's ($SPX) 25% gain in the dust. But that's not all – in 2024 so far, Palantir has already tacked on a remarkable 38.9%.
However, since a major bull gap higher in February, the stock has largely been consolidating its gains in a sideways channel between $20.50 and $25.50.
Palantir boasts a market cap of around $51.5 billion and an enterprise value of $50.6 billion, and the company is priced at a premium. The forward price/earnings ratio is a cool 149.81, with a price/sales multiple of 19.09. And if that's not enough to make your head spin, the price-to-earnings-growth (PEG) ratio clocks in at a staggering 5.49.
Clearly, investors are betting big on Palantir's future growth potential, but these high multiples also mean the company needs to deliver consistent growth to justify the hefty price tag.
PLTR Beats on Earnings, Misses on Guidance
In its Q1 earnings report, the company raked in $634 million in revenue, surpassing the estimated $625 million and marking a 21% year-over-year increase. Earnings per share (EPS) came in at $0.08, right on target, and net income reached a cool $105.5 million.
This stellar performance was fueled by robust demand for Palantir's AI platform from both government and commercial customers. The company's U.S. commercial revenue saw a jaw-dropping 70% year-over-year jump in Q4 2023, proving that the private sector is hungry for Palantir's solutions.
However, the stock fell after a miss on Q1 billings, along with revenue guidance that fell short of investors' expectations. Management is anticipating Q2 revenue of $649 million to $653 million, which came in light compared to Wall Street's $653 million consensus.
Likewise, PLTR predicts full-year revenue of $2.68 billion to $2.69 billion, while analysts were looking for $2.71 billion, on average.
Palantir's Strategic Roadmap
Palantir Technologies has inked a string of high-profile contracts and partnerships lately, cementing its position as a major AI and data analytics player. One standout deal is the $178 million contract with the U.S. Army for developing the Titan system – a next-gen intelligence ground station using AI and machine learning to collect and disseminate sensor data.
Palantir also landed a massive $480 million deal with the Army for the Maven Smart System, part of the Pentagon's marquee AI program. This bad boy ingests data from sources like satellite imagery and geolocation, then uses AI to automatically detect potential targets.
With this contract running through 2029, Palantir is solidifying its role in enhancing military ops with AI-driven insights. At its annual AI Conference in June 2024, the company showcased how customers like United Airlines (UAL) and Nebraska Medicine are using its Artificial Intelligence Platform (AIP) to create innovative products and solutions. Clearly, Palantir is fostering a community driving innovation with its AI platform, aided by its client “bootcamps.”
Speaking of innovation, let's talk about Palantir's strategic partnership with Oracle (ORCL), announced in April 2024. This collab involves migrating Palantir's Foundry workloads to Oracle Cloud Infrastructure and deploying its AI Platforms via Oracle's distributed cloud environments. By combining forces, these two powerhouses are poised to deliver secure, scalable solutions meeting the highest security and sovereignty standards.
Palantir's Path Ahead
Analyst ratings for Palantir are mostly tepid, with the mean target price of $20.93 suggesting potential 12.2% downside from its current price.
Out of 14 analysts, the general consensus is to "Hold" the stock. Specifically, 2 analysts recommend a “Strong Buy,” 1 suggests a “Moderate Buy,” 6 advise “Hold,” 1 leans toward a “Moderate Sell," and 4 advocate a “Strong Sell.”
The Bottom Line on PLTR Stock
Palantir is certainly an AI stock to watch, with its impressive growth and strategic moves, but it's not all smooth sailing. The company's ability to deliver consistent growth, and meet or exceed investors' lofty expectations, will be crucial in justifying its high valuation. Its late summer earnings report will be a key moment to see if the company can keep up its momentum, especially if any guidance updates are offered.
After years of fits and starts, whether Palantir's stock will finally break out into blue-sky territory is still up in the air, but one thing's for sure – with investors and analysts deeply divided over the stock's prospects, this AI software player is one growth stock worth keeping on your watchlist.
On the date of publication, Ebube Jones did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
