HomeBusinessShares of Palantir Technologies rose again today. Is it too late...

Shares of Palantir Technologies rose again today. Is it too late to buy the red-hot growth stocks in artificial intelligence (AI)?

Palantir Technologies (NYSE:PLTR) jumped again on Wednesday, adding to its growing win streak. The stock rose as much as 12.3% in early trading and was still up 11% as of 1:50 PM ET.

While the broader market’s upward trajectory has undoubtedly helped fuel profits, the clear catalyst that sent the data mining and artificial intelligence (AI) specialist higher was news that the company had beaten off competition for a major military contract.

Palantir was awarded a $178.4 million contract to supply 10 Tactical Intelligence Targeting Access Node, or TITAN, systems, which use sensor data to locate targets. However, the contract could be much more lucrative. As my colleague Lou Whiteman noted, the first ten systems could lead to 100 to 150 additional systems.

The company has a long history of providing AI solutions to the US government and its allies, so this is just the latest in a long line of contract wins.

Are Palantir Technologies Stocks Still a Buy?

While this news is welcome, investors should be more excited about another aspect of Palantir’s business. The company has adapted its existing AI systems to meet the needs of enterprise companies. AI’s ability to detect patterns hidden deep in data has enormous implications for large companies. It can help manage inventory levels, suggest product revisions, or detect troubling trends in customer service calls, among other things.

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The advent of generative AI is right up Palantir’s alley, and the company quickly developed a solution to meet increasing demand. In the fourth quarter, this boosted results as US commercial revenue grew 70% year over year, while total contract value increased 107%.

Palantir Technologies stock is up as much as 215% over the past year and is already up 55% this year. As a result, traditional valuation metrics appear stretched. The stock sells for 80 times expected earnings and 22 times expected revenue, but that doesn’t take into account Palantir’s impressive growth. Using the more appropriate price-earnings-growth ratio yields a valuation of less than 1, the standard for an undervalued stock.

If demand for AI continues to grow, and I believe it will, Palantir’s experience in this area could pay big dividends for the company – and for its investors.

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Danny Vena holds positions at Palantir Technologies. The Motley Fool holds positions in and recommends Palantir Technologies. The Motley Fool has a disclosure policy.

Shares of Palantir Technologies rose again today. Is it too late to buy the red-hot growth stocks in artificial intelligence (AI)? was originally published by The Motley Fool

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