One of the breakout stars of the artificial intelligence (AI) revolution is a data analytics software company Palantir Technologies(NYSE:PLTR). Since its IPO in late 2020, Palantir shares have generated a 488% return as of the market close on November 7.
But to be fair, Palantir’s journey has not been without challenges and drama. Despite a successful public debut a few years ago, Palantir’s shares tumbled for much of 2022 against the backdrop of a tough macroeconomy. With shares trading as low as $6 in early 2023, Palantir’s prospects didn’t look bright. The company had virtually no private sector presence and growth in its government contracts slowed.
Start your morning smarter! Wake up with Breakfast news in your inbox every market day. Register for free »
However, the launch of the Palantir Artificial Intelligence Platform (AIP) in April 2023 led to a comeback that even Rocky would appreciate.
Two of Palantir’s first bulls on Wall Street: Dan Ives of Wedbush Securities and Mariana Perez Mora of Bank of America — have placed price targets of $57 and $55 on Palantir, respectively. AI has become a catalyst of epic proportions for Palantir, and as of this writing, its shares are trading at an all-time high of around $56.
While Palantir’s current stock price doesn’t leave much room for percentage growth versus Ives and Perez Mora’s targets, it’s more important for investors to understand the reasons behind these analyst upgrades and extrapolate what these themes might suggest for the company’s future. future of Palantir. .
Palantir CEO Alex Karp began his third-quarter shareholder letter with a short statement stating that “this is just the beginning.”
That’s quite a bold statement when your company just achieved 30% year-over-year revenue growth, closed more than 100 deals worth at least $1 million, and generates positive net income and free cash flow on a consistent basis. At some point you would expect the momentum to slow down.
But apparently Karp, Ives and Perez Mora are calling for even more growth. Let’s take a look at what’s driving this optimistic outlook and explore how Palantir’s AI journey is unfolding.
Image source: Getty Images.
One of the ways Palantir has been able to differentiate itself from the competition since launching AIP is through a unique lead generation strategy. In fact, Palantir hosts immersive seminars called “boot camps” where potential customers can demonstrate the company’s software suites. This hands-on approach helps leads actually identify a use case around AI and understand how Palantir’s software can help alleviate their pain points.
Image source: Palantir Investor Relations.
The growth trends shown above demonstrate how Palantir’s boot camps have helped the company grow its customer base while diversifying its revenue base, underlined by rapid private sector penetration.
However, as Karp and Wall Street suggest, there are many reasons to believe this growth is still in its early stages.
For starters, Palantir has quietly signed more deals related to the US military’s AI efforts. While government contracting is a fairly unwieldy affair, Palantir shows that the defense sector is an important and evolving part of the AI landscape – an opportunity I would encourage investors to lose sleep over.
In addition, the company has entered into a number of strategic alliances this year Microsoft, Oracle, MetaplatformsAnd Amazon that have yet to bear fruit.
The chart below compares Palantir to a cohort of leading software-as-a-service (SaaS) companies on a price-to-sales (P/S) basis. The obvious conclusion from the analysis below is that Palantir is the most expensive stock in this comparable series. But on a more subtle note, Palantir’s price action has seen meaningful valuation expansion especially in recent months.
PLTR PS Ratio Chart
Given the momentum fueling Palantir stock right now, I’m not surprised to see the stock hit the price targets Ives and Perez Mora put forward. I think investors should worry less about specific prices at this stage and focus more on the long-term story surrounding Palantir.
Defense technology is still largely an untapped market, and many of Palantir’s big tech partnerships are not yet operating at scale. I believe that as time goes on, customer adoption of AIP will continue to accelerate across the company’s commercial and public sector businesses as more use cases are discovered through AIP. Additionally, relationships with many of the most influential players in AI have made me optimistic about Palantir’s role in the future of AI.
While I think the stock is pricey right now, I see further gains ahead and am aligned with expectations that Palantir’s journey is still beginning.
Consider the following before purchasing shares in Palantir Technologies:
The Motley Fool Stock Advisor The analyst team has just identified what they think is the 10 best stocks for investors to buy now… and Palantir Technologies wasn’t one of them. The ten stocks that survived the cut could deliver monster returns in the coming years.
Think about when Nvidia made this list on April 15, 2005… if you had $1,000 invested at the time of our recommendation, you would have $904,692!*
Stock Advisor provides investors with an easy-to-follow blueprint for success, including portfolio building guidance, regular analyst updates, and two new stock picks per month. TheStock Advisoris on duty more than quadrupled the return of the S&P 500 since 2002*.
View the 10 stocks »
*Stock Advisor returns November 11, 2024
John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Bank of America is an advertising partner of Motley Fool Money. Randi Zuckerberg, former director of market development and spokeswoman for Facebook and sister of Mark Zuckerberg, CEO of Meta Platforms, is a member of The Motley Fool’s board of directors. Adam Spatacco holds positions at Amazon, Meta Platforms, Microsoft and Palantir Technologies. The Motley Fool holds positions in and recommends Amazon, Bank of America, Datadog, Meta Platforms, Microsoft, MongoDB, Oracle, Palantir Technologies, ServiceNow, and Snowflake. The Motley Fool recommends C3.ai and recommends the following options: long calls in January 2026 for $395 at Microsoft and short calls in January 2026 for $405 at Microsoft. The Motley Fool has a disclosure policy.
This artificial intelligence (AI) software stock – up 488% since its IPO – still has huge upside, according to two Wall Street analysts, and was originally published by The Motley Fool
