TLDR:
- Palantir stock sees major upgrade from Wedbush, with price target raised to $75 from $57
- Company’s U.S. commercial revenue surged 54% to $179 million last quarter
- Wedbush also upgraded Snowflake and Elastic, seeing broader AI benefits across software sector
- Palantir’s stock has risen over 250% in 2024
- Insider selling has increased, with CEO Alex Karp selling 33 million shares worth $1.6 billion
The surge in artificial intelligence adoption has propelled Palantir Technologies to new heights in 2024, with the company’s stock rising over 250% this year. However, this remarkable growth comes alongside increased insider selling activity from top executives.
Wedbush analysts have expressed strong confidence in Palantir’s future, raising their price target to $75 from $57. The firm’s analysts, led by Dan Ives, drew attention to what they describe as Palantir’s “game-changing” artificial intelligence platform strategy, expecting significant developments in use cases over the next 18 months.
The company’s performance metrics support this optimistic outlook. Palantir’s U.S. commercial revenue increased by 54% to $179 million in the latest quarter, while its U.S. commercial customer count grew by 77% compared to the previous year. The total contract value saw a 37% increase, reaching nearly $300 million.
In the government sector, Palantir continues to show strength. U.S. government revenue rose by 40% to $320 million, with the company reporting increased adoption of large language models across various government branches, including the White House, Congress, Defense, and Intelligence agencies.
The company’s existing customer relationships remain strong, with a net dollar retention rate of 118% in the last quarter. This metric measures revenue growth from customers who have been with the company for more than a year, excluding any customer losses.
However, amid this growth story, notable insider selling activity has caught investors’ attention. CEO Alex Karp has sold more than 33 million shares in recent months, generating gross proceeds exceeding $1.6 billion. Chairman Peter Thiel also sold over $1 billion in stock between September and early October.
The broader software sector is also benefiting from the AI boom. Wedbush upgraded cloud-based data storage company Snowflake and data analytics company Elastic to Outperform from Neutral. The firm also increased its price target for Salesforce to $375 from $325.
Elastic’s stock responded positively to recent developments, jumping 15% after beating earnings expectations. Wedbush set a new price target of $135 for Elastic, suggesting potential for an additional 25% increase from current levels.
The company’s valuation metrics have drawn attention from market observers. Palantir currently trades at a forward price-to-sales ratio of approximately 40 times next year’s analyst estimates. Even after accounting for net cash, the enterprise value to sales multiple remains at 39 times.
These valuation levels exceed historical norms for software-as-a-service companies, which traded at a 19.4 enterprise value to sales multiple during peak valuations while growing revenue in the low 30% range.
For comparison, Palantir’s recent quarterly growth rate was 30%, aligning with these historical growth patterns but trading at notably higher multiples.
The company’s expansion strategy focuses on converting AI prototype work into production-scale implementations. While Palantir has successfully attracted new customers for initial AI prototype work, the larger opportunity lies in expanding these relationships into full-scale deployments.
This potential for expansion within newer customers represents a key growth opportunity, as these relationships are not yet reflected in the company’s net dollar retention rate, which only includes customers from more than a year ago.
The AI software market continues to evolve rapidly, with new use cases emerging as large language models proliferate following the broader adoption of generative AI technology. Palantir’s positioning in this market has attracted attention from both investors and analysts.
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