Shares of Palantir Technologies (PLTR) have seen a 205% increase in the past year, driven by the excitement around artificial intelligence (AI) stocks and the company’s profitability. However, concerns have been raised about the stock being overvalued, with analysts giving it a Hold to Moderate Sell rating. Despite this, investors are eagerly awaiting Palantir’s first-quarter earnings report on May 6. The stock has retreated 15% from its March highs, leading to speculation about whether it presents a buy-the-dip opportunity.
Palantir’s revenue in the past has been largely derived from supporting the U.S. government in counterterrorism initiatives, with over half of its 2023 revenues coming from this sector. The company is now focusing on its growing commercial business, offering the AI Platform (AIP) to help enterprises manage and interpret data. The demand for AIP is high, according to Palantir’s CEO Alex Karp, indicating potential growth opportunities in the commercial sector.
PLTR has had a tumultuous stock history, with significant fluctuations in its value since its IPO in September 2020. Despite a significant rally to $39 in January 2021, the stock fell to an all-time low of $6 in December 2022. While it has since recovered, it remains below its peak price in 2021. Palantir’s profitability trends are showing positive momentum, with the company achieving GAAP profitability for the fifth consecutive quarter, indicating a strong financial position.
The company’s U.S. commercial business is experiencing growth, with revenue increasing to $131 million in the fourth quarter of 2023, up over 70% year-over-year. Palantir’s AI Platform is driving new customer acquisitions and expansions with existing clients, indicating potential for future growth. The company also expects its U.S. government business to reaccelerate in 2024, with new contracts like the $178 million U.S. Army contract for project Titan.
Looking ahead, Palantir’s strength lies in secular AI tailwinds and a growing commercial business, but the company also faces challenges such as competition and its decision not to engage with China. While the stock may benefit from inclusion in the S&P 500 index and sustained profitability, concerns about valuation and governance could impact its long-term outlook. Investors are advised to conduct their own research before making investment decisions.
The upcoming earnings report on May 6 is expected to be crucial for PLTR stock’s performance in the near term. Historically, the company has seen strong post-earnings rallies when beating revenue and EPS estimates, while missing estimates has led to significant declines in the stock price. Investors are advised to watch for first-quarter earnings results before making investment decisions, as the stock’s post-earnings performance may extend into subsequent trading sessions. Ultimately, Palantir’s growth narrative is fueled by the AI boom and increasing data challenges, showcasing both opportunities and risks for investors.
