TLDR:
- Palantir’s stock has surged to $42.50, with a market cap of $96B, trading at 40x sales
- AIP (Artificial Intelligence Platform) driving unprecedented demand, especially in US commercial sector with 55% growth
- Average revenue per US commercial customer is $2.15M, limiting potential client base
- Company faces competition from major cloud providers but offers unique all-in-one solution
- Analysts are divided: some predict a 32% drop while others raise price targets, with most maintaining “hold” rating
Palantir Technologies (NYSE: PLTR) has seen its stock price climb to $42.50, reaching a market capitalization of $96 billion, as investors bet big on the company’s artificial intelligence capabilities.
The data analytics firm’s shares have experienced significant momentum, trading at 40 times sales, approaching levels last seen during the 2022 software-as-a-service bubble.
The company’s latest quarter showed revenue rising 27% year over year to $678 million, with U.S. commercial revenue notably increasing by 55% to $159 million. This growth has been primarily driven by the company’s Artificial Intelligence Platform (AIP), which management describes as receiving “unprecedented” demand compared to previous product launches.
AIP allows businesses to integrate large language models into their operations while maintaining control over their data, a crucial feature for companies concerned about data security. The platform also incorporates generative AI directly into workflows, distinguishing it from standalone AI tools.
Currently, Palantir serves 295 U.S. commercial customers, with an average revenue per customer of $2.15 million annually. This high price point effectively limits the potential client base to larger enterprises, though it also reflects the sophisticated nature of the company’s offerings.
The company’s profit margins stand at 20%, below the 30% achieved by industry standard-bearer Adobe. To justify its current valuation, analysts suggest Palantir would need to maintain a compound annual growth rate of 21.4% over the next five years to match Nvidia’s forward earnings multiple, or 36.2% to reach Adobe’s valuation levels.
Recent insider trading activity shows some movement, with Director Lauren Elaina Friedman Stat selling 7,321 shares at $43.90 per share, while institutional ownership remains at 45.65% of the stock.
Wall Street maintains mixed views on Palantir’s prospects. Deutsche Bank raised its price target to $21.00 while maintaining a “sell” rating. Wedbush showed more optimism, increasing its target to $45.00 with an “outperform” rating. Citigroup adjusted its target to $28.00, keeping a “neutral” stance.
The company’s recent quarterly results showed earnings of $0.03 per share, slightly missing consensus estimates of $0.04. However, revenue exceeded expectations, coming in at $678.13 million against projected $653.23 million.
Palantir’s government business continues to grow, though at a slower pace than its commercial segment, with government revenue increasing 23% in the recent quarter. The company maintains strong relationships with various government agencies, particularly in defense and intelligence sectors.
Technical indicators show the stock trading above both its fifty-day moving average of $35.87 and its two-hundred-day moving average of $28.28, suggesting strong upward momentum. The stock’s beta of 2.72 indicates higher volatility compared to the broader market.
Market observers note that while Palantir’s growth trajectory remains strong, particularly in the AI space, the current valuation may be pricing in several years of future growth.
The company’s projected revenue growth rates of 24% and 21% for 2024 and 2025, respectively, fall below what some analysts suggest would be needed to justify the current stock price.
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