Artificial intelligence (AI) has rapidly evolved into a crucial component of modern technology, pivotal in propelling the tech sector’s gains. AI is now an indispensable element of information technology (IT). Its functionalities have been applied in diverse ways, improving IT processes, enhancing communication, and delivering better data analysis.
One stock reaping the benefits of increased AI demand is Palantir Technologies Inc. (PLTR), which has surged 168% over the past 52 weeks.
A recent catalyst that sparked the stock’s upward trajectory was the news that Palantir outperformed rivals to secure a $178.4 million Army contract. Moreover, Palantir's robust financial performance over the last year has convincingly underpinned the bull run for its shares.
But after its stellar rally, is Palantir Technologies stock still a buy? Let’s find out.
About Palantir Stock
Headquartered in Denver, Colorado, Palantir Technologies (PLTR) - founded over two decades ago in 2003 - is a software company specializing in big data analytics and fusion platforms for government, defense, and commercial clients. Its core platform, Foundry, helps users integrate, analyze, and visualize disparate data sets, enabling them to carry out various security activities. It commands a market cap of $50.5 billion.
Shares of Palantir have had a sensational rally in 2024, rising over 32% on a YTD basis. That surpasses both the S&P 500 Index ($SPX) and S&P 500 Information Technology sector ($SRIT), which have returned 9.1% and 11.7%, respectively.
Palantir trades at 157.4x forward earnings, significantly higher than its closest peers and its own longer-term average of 125.76. The stock also looks expensive in terms of price/cash flow and price/sales, which stand much higher than PLTR’s industry peers at 256.67x and 22.88x, respectively.
Palantir Beats Q4 Estimates
After Palantir released its Q4 results in early February, the stock soared about 20% in a single trading session. The company’s revenue increased 19.6% year-over-year to $608.4 million, topping the consensus estimate of $602.8 million. Adjusted earnings increased 166.7% year over year to $0.08 per share, which aligned with what Wall Street estimated.
Palantir’s flagship product, the Artificial Intelligence Platform (AIP), has gained significant traction since its launch in mid-2023. CEO Alex Karp noted that "momentum with AIP is now significantly contributing to new revenue and new customers" for the company. At AIPCon last month, Palantir proudly announced the acquisition of 20 new customers and partners for AIP.
The company has recently strengthened its sustainable revenue pipeline and solidified customer relationships through significant partnerships. In addition to clinching that notable deal with the U.S. Army, the company established a demining partnership with Ukraine's Ministry of Economy in March.
The company projects sales between $612 million and $616 million for the current quarter. For fiscal year 2024, it expects revenue to range between $2.652 billion and $2.668 billion. Management is optimistic about the U.S. commercial market, and expects it to grow at least 40% by 2024 to reach $640 million.
Analysts tracking Palantir expect diluted earnings per share to increase to $0.16 in 2024 and $0.21 in 2025.
What Do Analysts Expect for Palantir Stock?
PLTR is trading at a premium to the average analyst price target of $20.61. However, Wedbush analyst Dan Ives raised the target price for the stock last month to a new Street-high of $35, while maintaining an “Outperform” rating. That indicates an upside potential of almost 54%. Ives believes 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.”
On the contrary, Monness, Crespi, Hardt & Co. analyst Brian White downgraded Palantir’s ratings to “Sell” from “Neutral” and issued a 12-month price target of $20. Following the stock’s rapid climb over the last year, White has become pessimistic about the company's prospects. He said, “After a meteoric rise on the [generative artificial intelligence] rocket, back to reality.”
Despite the company’s outstanding growth potential, Wall Street has a cautious outlook for the stock, rating it a “Hold" overall. Out of the 14 analysts covering PLTR stock, two recommend “Strong Buy,” one recommends “Moderate Buy,” five recommend “Hold,” one recommends “Moderate Sell,” and five recommend “Strong Sell.”
