Could Palantir's Shares Potentially Skyrocket 450%, Reaching a Staggering $1 Trillion Value? A Financial Expert Provides an Unanticipated Viewpoint.
Could Palantir's Shares Potentially Skyrocket 450%, Reaching a Staggering $1 Trillion Value? A Financial Expert Provides an Unanticipated Viewpoint.
Palantir Tech (PLTR dropping by 3.72%) is currently the top-performing stock within the S&P 500 (^GSPC lower by 1.11%) in 2024. Shares have soared 360% this year due to a string of notably strong financial reports, fueled by the popularity of its new artificial intelligence (AI) platform.
Various analysts have been negative throughout this surge, yet Dan Ives from Wedbush Securities has consistently been positive. He sees Palantir as the upcoming Oracle, and the leading AI-focused company. Even more surprisingly, he speculates that Palantir could one day be a trillion-dollar business if it persists with its execution.
Ives made this statement during an interview with Schwab Network in November, implying a potential 450% increase from the current market cap of $180 billion. Here's what you need to understand about Palantir.
What distinguishes Palantir from competing software companies
Palantir sells analytical software that helps businesses decipher challenging data. Its main platforms, Gotham and Foundry, incorporate multiple data sets and machine learning models into an ontology, a structure that connects digital data to real-world objects. Users can query the ontology using analytical applications to gain insights that improve decision-making.
Palantir strengthened its core software with a new AI platform called AIP last year. It offers support for large language models, enabling users to interact with Gotham and Foundry using natural language. For example, a business utilizing Foundry to monitor its supply chain could prompt the platform to highlight potential problems and propose solutions.
In an interview with CNBC earlier this year, CEO Alex Karp explained Palantir's edge over competitors. Essentially, he believes the software is constructed differently, functions better, and generates more value for customers than available alternatives. When Karp mentions the software is built differently, he refers to its ontology-centric architecture. This feature allows enterprises to derive actionable insights from large volumes of raw data.
Palantir revamped its sales strategy around its AI platform as well. The company runs AIP training sessions, which are interactive workshops where potential clients learn to apply the product to their data within only five days. This approach has led to robust adoption. In fact, Palantir landed at the top spot among two leading vendors in the Dresner Advisory Services 2024 study on AI, data science, and machine learning software.
Palantir impressed investors with its third-quarter financial report
Palantir released robust financial results for the third quarter, surpassing forecasts on both the revenue and earnings lines. Its customer count grew by 39% to 629, with the average existing client boosting its spending by 18%. Revenue rose 30% to $726 million, marking the fifth consecutive quarter of acceleration, and non-GAAP net income increased 42% to $0.10 per share on a diluted basis.
Karp attributed the positive figures to demand for AIP. "Our business growth is accelerating, and our financial performance is outperforming expectations as we fulfill an unwavering demand from our U.S. government and commercial clients for the most innovative AI technologies," he stated in his shareholder letter.
Palantir also raised its full-year forecast, expecting revenue to rise 26% in 2024. This would represent a substantial pickup from last year's 17% revenue growth. Moreover, recent developments suggest that this momentum could persist into the next year. Palantir received FedRAMP High Authorization in December, enabling its full range of products to support the U.S. government's processing of sensitive unclassified workloads.
Later, the company announced a $618.9 million contract with the U.S. Army to improve its long-term support for the Army's data-driven decision-making platform. "Our ongoing expansion of AI capabilities enables the Army's own ability to develop applications and integrate the benefits of effective data analysis across its top priorities," said Akash Jain, President of Palantir's U.S. government business.
Palantir stock appears costly given future earnings projections
In summary, Palantir seems to be capitalizing on an enormous opportunity with its AI platform (AIP). The International Data Corporation predicts that AI platform spending will grow 51% per year through 2028, making it the fastest-growing cloud technology over the next few years.
However, investors should remember that no stock is worth buying at any price, regardless of how well the business is performing. Palantir shares currently trade at 225 times adjusted earnings. This valuation appears particularly high when the company's earnings are estimated to increase 31% in the next 12 months.
As a result, market analysts have expressed skepticism about the stock. Its median 12-month target price of $39 per share signals a potential drop of 50% from the current share price of $79. Even Ives, with a target price of $75 per share, anticipates near-term declines in the stock.
The upshot? Palantir could grow into a trillion-dollar company in the future, according to Ives' assessment. Patient shareholders comfortable with extreme volatility can maintain their positions. However, potential investors might want to wait for a better entry point. I believe more promising entry opportunities will emerge in the near future.
In light of the impressive financial performance, many individuals are exploring investment opportunities in Palantir Tech (PLTR). Despite the current share price of $79, some analysts suggest waiting for a more favorable entry point, considering the stock's high valuation of 225 times adjusted earnings. On the other hand, Dan Ives from Wedbush Securities, who sees Palantir as the upcoming Oracle, anticipates a potential trillion-dollar business if the company persists with its successful execution and AI-focused strategies. [Finance, investing, money]