Discover Why Investing in Palantir Stock Might Be a Golden Opportunity, Suggests Wall Street Guru
Palantir Technologies (PLTR), currently down 1.42%, has been a standout performer on the market, skyrocketing 320% year-to-date as of Dec. 5. The buzz surrounds the company's artificial intelligence (AI) capabilities, landing it the title of the S&P 500's best-performing member this year with a present value of $165 billion.
Analyst Dan Ives from Wedbush Securities sees significant potential, suggesting "Palantir could be the next Oracle." This comparison, although potentially less trendy, carries massive implications. Oracle is a $500 billion giant, renowned for its presence in various enterprise-software verticals, including analytics and business intelligence platforms. Ives isn't expecting an overnight transformation but predicts Palantir will grow into this valuation within the next three to four years.
Despite skepticism, many analysts remain pessimistic about Palantir. With a median target price of $38, they anticipate a 47% decrease from the current share price of $72.
Palantir's Market Dominance in AI
Palantir has cemented its position as one of the largest players in the AI platforms market. The company helps businesses and government organizations decipher intricate data, aiding them in incorporating machine learning (ML) models into analytical applications. Moreover, its AI platform, AIP, supports large language models and generative AI within its core software products.
Recognizing Palantir's dominance, Forrester Research labeled the company as a leader in AI/ML platforms in August. Additionally, Dresner Advisory Services listed Palantir as a top vendor in their 2024 market study on AI/ML and data science software.
The International Data Corp. estimates AI platform spending will grow by 41% annually from 2021 to 2028. Meanwhile, Grand View Research predicts a 27% annual increase in the data-analytics software market through 2030, setting the stage for Palantir's continued success.
Palantir's Quarterly Financials
Palantir's third-quarter financial report showcased substantial progress, surpassing expectations, raising full-year guidance, and offering positive insights into the company's performance. Total revenue rose 30% to $725 million, marking the fifth consecutive quarter of accelerated income. Non-GAAP net income swelled 43% to $0.10 per diluted share.
Highlighting the growth, U.S. government customers reported a 40% increase in sales, marking a significant uptick from 24% in the second quarter and 12% in the first quarter. CFO Dave Glazer attributed this increase to new contract awards, signaling a growing appetite for AI in government software.
Management now expects full-year revenue to escalate by 26%, up from its initial forecast of 23%. However, this implies a modest deceleration of 4% in the final quarter relative to the past three quarters.
Ives' Bullish Outlook on Palantir
Analyst Dan Ives believes that as organizations across various sectors embrace AI analytics to improve productivity and operational efficiency, Palantir will benefit immensely. While Wall Street believes adjusted earnings will grow at 25% per annum from 2022 to 2027, Ives contends earnings may surge at a faster rate.
However, he admits the current price-to-earnings (P/E) ratio of 205 appears overly expensive. Despite this, Ives expects Palantir's stock to surge to $75 within the next 12 months, implying just 4% growth from its current share price.
In conclusion, while Palantir's performance is impressive, its valuation appears disconnected from the company's financials. Awaiting a more reasonable entry point, investing in Palantir right now may not be the wisest decision.
In light of Ives' optimistic forecast, some investors might consider allocating part of their finance portfolio to Palantir, seeing potential returns from its growing presence in the AI market. As the demand for data analytics software continues to increase, Palantir's money-making potential in this sector is significant, making investing an attractive option for some.
Given the remarkable growth Palantir has achieved in the AI market, investors might be interested in exploring different finance strategies for maximizing their returns, such as dollar-cost averaging or using options contracts for leveraging potential gains in the stock price.
