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Shares of Palantir Technologies (PLTR) have taken investors on a roller-coaster ride since its IPO (initial public offering) in October 2020. Palantir stock touched an all-time closing high of roughly $39 in January 2021, and fell to a record low of $6 in December 2022.
Today, valued at a market cap of $53 billion, Palantir stock trades just above $24 per share, up 40.7% on a YTD basis.
Palantir develops and deploys enterprise-facing software platforms for intelligence agencies and helps them gain an advantage in counter-terrorism operations and related investigations. More recently, the company is also building its commercial software segment.
Let’s see if you should invest in Palantir stock at its current valuation - which was called out as “gluttonous” in a high-profile downgrade to “Sell” last Friday at Monness, Crespi, Hardt & Co., with that bearish note sending the stock down 6.7% in a single session.
Argus is Bullish on Palantir Stock
Prior to that bear call, investment firm Argus initiated coverage on Palantir stock with a “Buy” rating and a price target of $29. According to Argus analyst Joseph Bonner, Palantir continues to expand its data management and analytics services to the private sector, helping it diversify its revenue base in recent years.
In 2023, the commercial business accounted for 45% of total sales, of which 38% was derived from international markets. While the legacy government business is expected to grow steadily, the commercial segment is expected to be a key driver of top-line growth in the upcoming decade. Similar to a host of other tech companies, Palantir is also investing heavily in artificial intelligence (AI) to provide AI-powered applications and aggressively acquire customers.
Bonner expects Palantir stock to end 2024 with adjusted earnings of $0.40 per share, up from $0.25 per share in 2023.
How Did Palantir Perform in Q1 of 2024?
Palantir shares sold off after the company announced its Q1 of 2024 results, reporting revenue of $634 million and adjusted earnings of $0.08 per share. The results were in line with expectations, as analysts were looking for Q1 sales of $625 million and earnings at $0.08 per share.
However, Palantir forecast Q2 sales between $649 million and $653 million, compared to consensus estimates of $653 million. Management's full-year sales estimate of $2.68 billion was also weaker than the consensus forecast of $2.71 billion.
In a shareholder letter, Palantir CEO Alex Karp explained, “We anticipate that our U.S. commercial business, which accounted for 24% of our revenue last quarter, will remain one of the most significant drivers of our growth in the near term.”
He added, “Warfare in this century will continue to be transformed by software. The platforms in use by our defense and intelligence partners present a very real threat to the survival of our enemies.”
Is PLTR Stock Undervalued?
The bullish recommendation from Argus was a fairly rare one for Palantir stock. Out of the 15 analysts covering PLTR, three recommend “strong buy,” one recommends “moderate buy,” five recommend “hold,” one recommends “moderate sell,” and five recommend “strong sell,” for a consensus of “hold.”
The average 12-month price target for PLTR stock is $21.47, a discount to Monday's close.
Palantir’s steady revenue growth (21% in Q1) has now helped it report a net profit for six consecutive quarters. In fact, analysts expect Palantir’s earnings to expand by 85% annually in the next five years. So, the company is now forecast to end 2028 with adjusted earnings of $5.50 per share. If the stock is priced at 30x forward earnings, PLTR stock should trade at $165 in May 2028, indicating an upside potential of almost 600% from current levels.
On the date of publication, Aditya Raghunath 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.
