Palantir Technologies (PLTR) -) stock attracted much attention in 2020 when it skyrocketed following its initial public offering.
The company's meteoric 344% climb from its September 2020 low to its peak near $45 in January 2021 made it a fan favorite of speculators; however, many of those investors were likely surprised by the 85% retreat that followed.
Fortunately, those losses likely sting less this year, given the company's shares have found their footing. A wave of interest in companies devoted to artificial intelligence solutions and a significant short position by short sellers overly confident in Palantir's decline has fueled a rip-roaring 139% rally since May 5.
Shares are up over 10% on July 28 as of 3:30pm ET.
Has Palantir put in its high for the year, or could there be more upside?
Palantir's Future May Depend On AI
Artificial intelligence has captured the imagination of everyone following the debut of OpenAI's ChatGPT in November.
ChatGPT was an instant success, garnering over 1 million sign-ups within its first week. Since then, companies big and small have rethought their business plans to fast-track AI initiatives.
The rush of AI investment has been a boon to investors in companies like Nvidia (NVDA) -) that supply the technology necessary to train and run generative AI programs like ChatGPT.
It has also fueled speculation that other companies, including Palantir, will profit handsomely from helping enterprises and the government develop and launch AI initiatives. Palantir Technologies CEO Alex Karp is counting on just such a thing.
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For example, Wall Street technology analyst Dan Ives is among those who believe AI is key to Palantir's future.
"As we begin the 4th Industrial Revolution, Palantir is engaging in the widespread trend of various industries leveraging recent generative AI innovations to streamline operations and improve expense profiles," wrote Ives to investors on July 28. "Given the company's extensive experience handling customer data, PLTR’s transition to a pure-play AI name will leverage its existing expertise to drive advancements and deliver AI solutions powered by high-quality data."
Ives also said the company is "the Messi of AI on the golden track to success."
The bullish outlook follows earlier comments from Wedbush Securities' Ives that we're on the cusp of an $800 billion opportunity in AI, providing a "long runway of growth ahead" reminiscent of the Internet boom in the mid-1990s.
If Palantir successfully leverages its existing Fortune 500 and government clients, it could be the go-to player in creating AI solutions.
Palantir Stock Could Climb Further
Ives initiated coverage of Palantir with a buy rating, The analyst thinks Palantir has an AI fortress that's "unmatched" in its ability to bridge the gap between what people and enterprises want to do and how to create AI tools that can do them.
Palantir will likely begin to benefit from the surge in AI interest over the next six to 12 months, according to Ives. If so it could provide a nice lift to revenue and profit.
The company will release its second-quarter earnings on August 7. In Q1, revenue rose 18% to $525 million, while earnings increased 150% to $0.05 per share. In the U.S., commercial revenue rose 26% to $107 million while government revenue increased 22% to $230 million.
How high does Ives think Palantir's stock could climb? He set Palantir's price target at $25, representing a more than healthy 42% return.
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