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Palantir (PLTR) certainly looked like the new go-to artificial intelligence (AI) play in town - right after Nvidia (NVDA) - following its impressive post-earnings surge in May. PLTR's springtime momentum has since cooled off for the summer season, but the company still has grand AI ambitions as it looks to stay on the growth track while making advancements on the front of margins.
Indeed, I found it quite remarkable when its CEO, Alex Karp, stated in a seated interview with CNBC that his firm seeks to "embarrass" competitors to work with the U.S. government. Undoubtedly, Palantir's bread-and-butter contracts have been with the U.S. government. As the firm looks to further expand its offerings to commercial customers, I do think the stock's growth prospects may still be underrated by investors and analysts.
There's no question that Palantir can be a harder business to understand versus the likes of Nvidia or FAANG firms with AI exposure, given its dealings with the U.S. government. The analytics firm, which is a major player in the big data scene, has growing skin in the AI game - not just on the government side, but commercially as well.
As an AI play, Palantir has been outshined by many of its mega-cap peers, from Microsoft (MSFT) to Alphabet (GOOG), over the past year. Still, I think it's a mistake to overlook PLTR as it seeks to move out of the shadows of larger, mega-cap AI competitors by casting a wider net for its AI offerings.
Palantir Continues to Win Over Some Big Business
Palantir is investing heavily in its AI capabilities. And it's not just governments that have taken notice. Looking ahead, I expect Palantir to continue winning major government contracts, all while it looks to ink a few deals with commercial firms.
More recently, Palantir received a nice jolt when news broke that it's en route to win business from the U.K. National Health Service (NHS). The potential five-year contract is said to be worth £480 million. Additionally, the data analytics firm also announced a partnership with PwC. The deal will see PwC make use of Palantir's impressive Foundry platform to help bolster its AI capabilities. Indeed, the PwC deal is an intriguing one that may mark the first of many as corporations look to prepare for the AI age - or the so-called fourth industrial revolution.
Though the two recent deals are a major boon for Palantir, shares are still stuck in a consolidation channel that's been in place since June 2023. Only time will tell what it takes for the stock to break out.
With the broader markets stuck in a September-October downtrend, it may prove difficult for PLTR to move higher under its own footing, without support from the broader basket of AI-driven tech firms.
In essence, I think investors are getting a great opportunity here to pick up a few shares while the company continues firing on all cylinders on the AI front.
Palantir: A Different Kind of AI Stock
Every company seems to be talking up its AI capabilities and ambitions these days. What separates Palantir from the pack is that it's trusted by major governments. As the firm opens the door to the commercial crowd, I do think Palantir will be able to continue sprinting on the growth treadmill without having to take a big hit to its margins.
Moving from government deals to corporate deals seems a heck of a lot easier than going from corporate deals to government contracts. In any case, some Wall Street analysts still have faith in Palantir stock, even as it looks to flatline into year's end.
Dan Ives of Wedbush Securities recently noted that Palantir is on a "golden path for its monetization story on the commercial side." Ives also noted that the firm is slated to enjoy commercial tailwinds in the back half of the year and going into 2024. I couldn't agree more.
Palantir isn't just on the right track, as it looks to bring on more commercial clients. It may very well emerge as one of the hotter players in the AI software scene as companies shift gears from the AI chip accumulation phase to finally putting its AI firepower to work.
The Bottom Line
Ives has an outperform rating on Palantir, with a $25.00 price target - almost 59% higher than Wednesday's $15.73 closing price. Though Ives has been known to be one of the bigger bulls on the AI stocks, I don't think his price target is unrealistic in the slightest as Palantir continues flexing its AI muscles.
The company has the tools to continue its rally, and you can be sure Mr. Karp will be ready to put them to work over the next year.
On the date of publication, Joey Frenette had a position in: GOOG , MSFT . All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
