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Palantir Technologies (PLTR) is one of the hottest tech stocks of 2024, rising 42.9% year-to-date and 211% in the last 12 months. Valued at $55.3 billion by market cap, Palantir builds and deploys software platforms that assist clients in counterterrorism investigations and operations in the U.S. and other international markets.
The company offers Palantir Gotham, where users can identify patterns hidden within datasets, enabling operators to plan and execute real-world responses to threats. On the commercial side, Palantir Foundry is a platform that transforms the ways in which companies operate by creating a central operating system for users to integrate and analyze data in one place. It also operates the Palantir Artificial Intelligence Platform, or AIP, which provides unified access to commercial LLMs, or large language models, that can transform and simplify data sets.
Let’s see what's been driving Palantir stock higher in recent months, and if it can continue to outpace the markets in 2024.
Palantir Beat Estimates in Q4 of 2023
Palantir shares surged over 20% in a single trading session following the announcement of its Q4 results last month. In the December quarter, Palantir reported revenue of $608.4 million, up 20% year-over-year, and adjusted earnings of $0.08 per share. Revenue topped analysts' consensus estimate of $602.4 million, while EPS arrived right in line with expectations.
In its annual shareholder letter, Palantir CEO Alex Karp emphasized the company is experiencing robust demand for its artificial intelligence (AI)-powered products as it continues to roll out the AIP to enterprises. Palantir also forecast sales between $612 million and $616 million in Q1, with fiscal year 2024 revenue estimated at $2.66 billion, in line with consensus estimates. Adjusted operating income is projected at $842 million for the year, comfortably exceeding expectations.
Over the years Palantir has worked largely with government organizations in the U.S. However, in Q4, its commercial sales surged 70%, while commercial customer count jumped 55% to 221. Management expects U.S. commercial sales to increase by 40% to $640 million in 2024, up from $457 million in 2023. Commercial sales have already expanded at a significant pace from $47 million in 2019 and $99 million in 2020.
A Focus on Profitability
Palantir’s top-line expansion has enabled the tech company to deliver consistent profits, ending Q4 with record margins. In the December quarter, it reported a net income of $93 million, its fifth consecutive profitable quarter, making Palantir eligible for inclusion in the S&P 500 Index ($SPX).
Palantir expects free cash flow to range between $800 million and $1 billion in 2024, indicating a margin of over 30%. It also ended 2023 with $3.7 billion in cash, up from $2.6 billion in the year-ago period - providing Palantir with enough flexibility to reinvest in growth and target accretive acquisitions.
What is the Target Price for PLTR Stock?
Analysts tracking Palantir expect adjusted earnings per share to rise from $0.25 in 2023 to $0.33 in 2024. So, priced at 75x forward earnings, PLTR stock is quite expensive.
Among Wall Street analysts, the average target price for Palantir stock is $20.67, which is lower than the current target price. However, Wedbush analyst Dan Ives recently raised the target price for the tech stock to a new Street-high of $35, while reiterating an “Outperform” rating. That indicates an upside potential of almost 42% to current levels, with Ives arguing that PLTR is “in the sweet spot to monetize a tidal wave of enterprise spend now quickly hitting the shores of the tech sector in our opinion.”
However, Wedbush is in the minority with its bullish view on Palantir. Out of the 14 analysts covering PLTR stock, two recommend “strong buy,” one recommends “moderate buy,” six recommend “hold,” one recommends “moderate sell,” and four recommend “sell.”
