HomeBusiness2 Reasons to Buy Palantir Stock Like There's No Tomorrow

2 Reasons to Buy Palantir Stock Like There’s No Tomorrow

Palantir Technologies (NASDAQ:PLTR) The stunning 372% share price rise through 2024 has made the stock extremely expensive, which explains why investors may be wary of buying this high-flying artificial intelligence (AI) software specialist at the moment.

Wall Street expects Palantir’s stock to decline over the next year, as evidenced by its 12-month average price target of $39, which indicates a 48% decline from current levels. According to 22 analysts covering Palantir, this average price target suggests the stock may have gotten ahead, which isn’t surprising when we look at valuation multiples.

After all, a price-to-earnings ratio of 399 and a sales multiple of 72 tell us that investors will have to pay significantly rich multiples to buy this AI stock. The technology-laden Nasdaq-100 the index, on the other hand, trades at 32 times earnings. However, there are a number of reasons why Palantir may be worth buying outright, despite its expensive valuation.

Palantir’s growth has accelerated in recent quarters thanks to rapidly growing demand for the company’s Artificial Intelligence Platform (AIP), which allows governments and organizations to integrate generative AI into their operations. It’s worth noting that this platform was ranked last year by market research firm Forrester as the best AI/ML (machine learning) platform, ahead of established names like Microsoft, AmazonAnd IBMamong others.

However, this wasn’t the only time Palantir has been among the top AI software platform providers. In September 2024, Dresner Advisory Services gave Palantir the highest rating in usability and analytical features and functions in its AI, Data Science and Machine Learning market study. Meanwhile, market research firm IDC ranked Palantir #1 in the AI ​​software platform market in 2021.

IDC points out that the AI ​​software platform market was estimated to be worth $14.2 billion in 2021 and grew by almost 37% that year. Palantir’s 2021 revenue was $1.54 billion, up 41% for the year. However, Palantir generated the majority of its 2021 revenue from selling software platforms and analytics solutions to government customers.

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It’s only in recent quarters that the company’s AI business has taken off, evidenced by the rapid growth of the company’s commercial customer base. For example, in 2021, Palantir’s commercial revenues rose 34% to $645 million, compared to the 47% growth in government revenues, which were $897 million.

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