Palantir Technologies (NYSE: PLTR) is a leading provider of AI software systems that enable machine-assisted and human-driven data analysis for enterprises across industries. It creates data fusion platforms such as Palantir Artificial Intelligence Platform (AIP) and Palantir Foundry to enhance big data analytics.
The stock has gained over 52% year-to-date (YTD) and 8.06% in the last five days to trade at $25.49 during pre-market hours on July 1. Last week's announcement to strengthen its alliance with Voyager Space further boosted Palantir's year-long rally.
The partnership expands on a June 20 deal between Palantir and Starlab Space, a joint venture led by Voyager Space and Airbus, where the AI systems maker will exclusively supply software data management solutions for the planned Starlab commercial space station.
Palantir and Voyager Space also signed a Memorandum of Understanding (MoU) in February to advance national security capabilities in commercial space. Voyager Space has completed over 2,000 spaceflight missions in over three decades. The firm aims to advance space exploration, security, and commercialisation through bold innovation and new-generation technologies.
The latest announcement will see Voyager Space integrating Palantir Foundry and the AIP into its defence solutions, in-house payload management system for International Space Station customers, and the planned Starlab station.
Palantir's machine learning and edge processing capabilities have helped it consistently deliver for the US Department of Defense (DoD), its biggest client. Their new-gen tech will also help Voyager accurately analyse flight testing data on solid fuel thrusters and achieve precision targeting for its optical communications systems for DoD customers.
Palantir's Stock Price Unfazed By Recent Downgrade
Brokerage firm Monnes, Crespi, and Hardt recently downgraded Palantir with a "Sell" rating and a target price of $20 per share. Analyst Brian White believes the market may avoid software stocks with excessively high valuations and that Palantir's current valuation has reached extreme levels.
As of June 28, Palantir's price-to-earnings (P/E) ratio was 211.08, which has increased steadily since April. A high P/E ratio means an overvalued stock, and investors pay a much higher price to earn a dollar of company earnings.
"After surging 167% in 2023, Palantir's stock was already rich upon entering 2024 and, with a 49% rally YTD, we believe valuation has now reached a gluttonous extreme," he noted.
While the brokerage expects Palantir to benefit further from the AI trend and volatile geopolitics in the long term, extreme valuation, pressure on software firms, and irregular revenue from government contracts could mean "the darkest days of this economic quagmire are ahead of us," Brian added.
However, Palantir stock prices have traded higher despite the downgrade. The company won and extended several defence contracts in the first half 2024. The US Army extended the ongoing Maven Smart System (MSS) contract with Palantir for five more years, worth nearly $90 million annually. Meanwhile, Palantir also secured a DoD Chief Digital and AI Office (CDAO) contract to make licenses of AI-powered operating systems across DoD, which could be worth $480 million over five years.
Palantir Records Steady Growth in Q1
The software firm's revenue increased 21% year-over-year (YoY) to $634 million for the quarter ended March 31. Around $257 million in revenues came from US government contracts, up 12% YoY. It posted a GAAP profitability for the sixth consecutive quarter at $106 million.
Palantir has also been busy demonstrating the advantages of its AIP interface to corporate clients. In May, the company signed a $19 million agreement with the Advanced Research Projects Agency for Health to help it leverage machine learning for better healthcare services.
US commercial revenue jumped by 40% YoY to $150 million, while customer count increased 69% YoY to 262 clients. For Q2, the company expects to generate revenues between $649 million and $653 million. Management also raised the full-year 2024 revenue guidance to up to $2.68 billion.
Wedbush Securities analyst Dan Ives highlighted Palantir's latest developments in a recent interview with BNN Bloomberg, describing the company as the "purest AI name in the market in terms of use cases." He believes the "monetisation is gonna play out" as the industry enters the "second derivative of AI."
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