Palantir Technologies (NYSE: PLTR) has emerged as a prominent contender in the artificial intelligence (AI) domain, propelled by its suite of data-analytics software such as Foundry, Gotham, Apollo, and the groundbreaking Artificial Intelligence Platform (AIP) released last April.
The company’s stock witnessed a notable surge of 167% in value in the previous year, further climbing by 24% in 2024, leading some potential investors to ponder whether they have missed the boat on Palantir.
While the rising enthusiasm for AI undoubtedly contributed to Palantir’s growth, there are compelling reasons why the stock remains an appealing prospect for long-term investors.
Reinvention Amidst Challenges
Initially reliant on government contracts, particularly from the U.S. military, Palantir faced skepticism around its core business model before going public in late 2020. As growth in the government sector slowed in 2022, the stock plummeted by nearly 65%.
However, the introduction of AIP marked a transformative phase for Palantir, catalyzing the company’s pivot towards a wider commercial audience. Innovative marketing initiatives, such as immersive “boot camps,” showcased AIP’s capabilities to potential clients, resulting in a substantial uptick in business inquiries.
With a 35% rise in total customer count in 2023 and a 44% growth in the private sector clientele, Palantir successfully dispelled doubts about its AI proficiency, attracting customers across diverse industries.
Image source: Getty Images.
Persistently Profitable and Promising Partnerships
Contrary to many high-growth SaaS enterprises, Palantir boasts a consistent profitability track record. With positive net income reported for five consecutive quarters and a significant surge in adjusted free cash flow last year, Palantir stands out in the AI landscape.
The strategic collaboration with Oracle for migrating data workloads onto Oracle’s cloud platform signifies a mutually beneficial alliance, offering Palantir a robust lead source for governmental and private sectors.
Valuation Considerations and Future Outlook
While Palantir’s stock valuation has surged, boasting a price-to-sales (P/S) ratio of 22.5 as the priciest among SaaS peers, the stock remains over 40% below its all-time peak, presenting an intriguing opportunity for investors.
Analyst projections, such as Wedbush Securities assigning a $35 price target to Palantir stock, implying substantial upside potential, reinforce the company’s promising trajectory.
As the AI narrative unfolds, investors are advised to exercise patience, monitor Palantir’s developments, and capitalize on the compelling demand for AIP coupled with robust financials and strategic collaborations.