There's plenty for bulls and bears to hash out over Palantir Technologies. Bulls point to improved profitability for PLTR stock. Bears focus on revenue growth for Palantir stock. Then, there's buzz over artificial intelligence stocks to consider for the maker of data analytics software.
Palantir stock has advanced 332% in 2024, with much of the gain coming after Donald Trump's Presidential election win as well as a third-quarter earnings beat.
Shares hit an all time intraday high of 80.91 on Dec. 9.
Palantir will join the Nasdaq 100 index before the open on Dec. 23. Meanwhile, Palantir joined the S&P 500 index on Sept. 23. The inclusion enables mutual funds and institutional investors to buy PLTR stock.
UBS analyst Karl Kierstead launched coverage of Palantir stock on Dec. 18 with a neutral rating. "Our review of Palantir's fundamentals left us very positive. In our view Palantir deserves a material multiple premium to most/all other public software firms. The main thing keeping us on the sidelines is valuation, which at 49 times revenue and 124 times free cash flow on 2025 estimates is simply tough to get over."
Palantir's third quarter revenue rose 30% to $725 million. Kierstead added: "Investors appear to be pricing in a sustainable 30% growth profile (if not higher) and continued margin gains."
One reason for Palantir's post-election rally could be views that artificial intelligence will play a bigger role in homeland security or defense spending.
Meanwhile, IBD doesn't put much weight on P/E ratios and other valuation metrics. On the other hand, here are some time-tested trading rules.
PLTR Stock Ranks No. 3 In IBD 50
And, Palantir stock ranks No. 3 on the IBD 50 roster of growth stocks. In addition, Palantir is among AI stocks to watch.
Meanwhile, PLTR stock has out-performed other software companies. The iShares Expanded Tech-Software Sector ETF, an industry index that includes Microsoft and many big-cap software companies, has gained 25% in 2024.
Palantir has already mined the AI opportunity with government customers for intelligence gathering, counterterrorism and military purposes. Now Palantir aims to use generative AI to spur growth in the commercial market.
The company continues to make progress with its "Artificial Intelligence Platform," initially rolled out in early 2023. Palantir hosted its fifth AIP event in September.
At AIPCon 5, clients such as the National Geospatial-Intelligence Agency, Aramark, and Mount Sinai demonstrated Palantir AI technologies in better supply chain management, operational efficiencies and health patient care.
However, Palantir has not disclosed pricing for AI products. Some analysts say Palantir needs to show more revenue progress with generative AI commercial deployments.
Still, Wall Street analysts now do not expect most software makers to monetize generative AI, or "conversational AI," in a material way until 2025 or later. Here's a look at the enterprise AI market.
Palantir Stock Fundamentals
On the news front, there's plenty for investors to mull. Oracle and Palantir announced a cloud computing alliance.
Meanwhile, here's a look at Palantir's international business, including how AI is doing in Europe.
Also, Palantir stock jumped 167% in 2023. The Nasdaq composite climbed 43% while the S&P 500 rose 24%.
The Denver-based company offers three platforms. One is Palantir Gotham, used primarily by government agencies. There's Palantir Metropolis for banks, financial services firms and hedge funds. And Palantir Foundry is used by corporate clients.
Palantir gets nearly 60% of its revenue from government agencies. Decelerating revenue growth is an issue. In 2022, revenue growth slowed to 24% from 40% in 2021 and 47% in 2020. In 2023, revenue grew 17% year-over-year to $2.23 billion.
Palantir Stock Technical Analysis
Meanwhile, Palantir's Relative Strength Rating stands at 99 out of a best-possible 99.
Also, Palantir stock holds a Composite Rating of 99 out of a best-possible 99, according to IBD Stock Check-up.
IBD's Composite Rating combines five separate proprietary ratings into one easy-to-use rating. The best growth stocks have a Composite Rating of 90 or better.
PLTR stock holds an Accumulation/Distribution Rating of B. That rating analyzes price and volume changes in a stock over the past 13 weeks of trading. A+ signifies heavy institutional buying; E means heavy selling. Think of a C grade as neutral.
As of Dec. 20, Palantir stock is very extended above an entry point of 29.83, according to MarketSurge. Also, PLTR stock trades well above a 5% buy zone.
Some investors may want to take profits.
Investors can sign up for news alerts from Palantir investor relations department here.
Further, check out IBD Stock Lists and other IBD content to find dozens more of the best stocks to buy or watch.
Follow Reinhardt Krause on Twitter @reinhardtk_tech for updates on artificial intelligence, cybersecurity and cloud computing.
