Palantir Technologies Inc. (NYSE: PLTR)
Trending stock of the day.
Palantir Technologies Inc. is a data fusion platform development business. The firm enables both machine-assisted and human-driven data analysis. Palantir Gotham, Palantir Apollo, and Palantir Foundry are part of its product platform. The company's solutions serve automotive, cyber, financial compliance, insurance analytics, law enforcement, case management, defence, insider threat, legal intelligence, and other industries. Palantir Technologies works with some of the most secretive areas within the U.S. government. Its software platforms build analytics and AI solutions that crunch vast amounts of data and help organizations make critical decisions in real-time. Having recently seen a sharp rise in stock prices, Palantir has seen an increase in mentions by 117% prompting investors to wonder what makes the stock gain such hype. Currently, shares of Palantir Technologies trade at $9.45 per share.
Positive Hype
There are lots of reasons why Palantir Technologies have gained much hype in the last few days, here are some of them.
Palantir recently announced a new product that could be a game-changer for government and commercial customers alike. A business focussed chatbot In its earnings call, CEO Alex Karp discussed its artificial intelligence platform (AIP), a product he stated: "the demand for of which is nothing I've ever seen in 20 years of being involved in Palantir."
Palantir is turning the profitability corner and succeeded again in Q1 by posting a second-consecutive quarter of $0.01 per share earnings. While that's not a massive figure, it shows Palantir's commitment to its goal, and investors should applaud that.
Palantir announced on Monday that sales increased 15% in the selling period that ran through late March. That result beat management's forecast and pushed revenue up to $525 million.
The company's year-over-year revenue growth was also impressive, coming out at a solid 17.7%.
Among revenue streams, government revenue was a significant contributor to growth, increasing 20% year-over-year. The Palo Alto, California-based company also grew its customer portfolio by 40% year over year, which is significant. Additionally, the company grew its commercial customer count to 280 in Q1 from 184 a year ago.
Looking forward to the rest of 2023, Palantir bumped its revenue guidance up by $5 million to between $2,185 million and $2,230 million compared to the guidance it gave at the beginning of the year.
Palantir's positive profitability trend continued in the first quarter of 2023, with a net profit of $19.2 million. This follows a successful previous quarter where the company achieved a quarterly profit of $33.5 million.
What’s more impressive is that Palantir issued a guidance change from GAAP net income for the entire year to GAAP net income every quarter. All of this fantastic news sent Palantir shares up 25% following its earnings release.
The company has deep pockets, nearly $3 billion against zero debt. A strong balance sheet gives Palantir flexibility to invest in growth, acquire emerging competitors, or repurchase shares to offset stock-based compensation, a common criticism of the company.
Negative Hype
Despite their recent success, investing in Palantir might still involve some risk. Here are some reasons you might not want to take a position in Palantir right now.
Palantir still has a lot of work ahead of it to build its scale and push profit margins into solidly positive territory. Profitability is one of the areas that need improvement.
Palantir's year-over-year revenue growth rate has declined since last year. The company's revenues come mainly from the government. But, the concern is that the company has not been able to grow its other commercial revenues as expected.
Conclusion
Palantir's stock looks reasonable, even for a software stock. 45 times forward earnings isn't bad for a company that's still improving its margins, and 10 times sales is exactly what you'd expect to pay for a well-executing software stock. Because of its valuation and potential for upside, Palantir looks like a great stock to a position in here and is an excellent way to invest in the AI revolution.
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