Dan Ives, an analyst at Wedbush Securities, recently expressed bullish sentiment towards Palantir Technologies, a renowned tech stock in the artificial intelligence (AI) industry. Ives referred to the company as the Messi of AI due to its impressive performance in the fourth quarter of 2023. Following the stellar earnings report, Ives upgraded his price target for Palantir, suggesting a potential upside of over 40% from current trading levels.
Palantir Technologies has often faced criticism and skepticism, with some viewing it as nothing more than an IT consultant for the public sector due to its close ties with the U.S. government. However, the recent surge in performance and the company’s foray into the AI arms race have garnered attention and support from investors.
Palantir offers a suite of software products, including Foundry, Gotham, and Apollo, which assist large enterprises in complex data analytics and synthesis. In April of 2023, the company unveiled its latest flagship product, the Palantir Artificial Intelligence Platform (AIP). Although initially overshadowed by big tech players in AI development, Palantir’s boot camps – immersive seminars allowing prospective customers to test its software – have proven successful in generating sales leads.
Throughout 2023, Palantir experienced significant growth, expanding its customer base by 35% year over year. The company’s penetration into the private sector was particularly noteworthy, with a 44% increase in commercial customers. Notably, revenue from U.S. commercial customers soared by 70% in the fourth quarter alone. This shift indicates Palantir’s evolution from primarily a government contractor to a diversified enterprise software developer.
Despite the macroeconomic challenges faced by many industries in recent years, Palantir’s revenue still grew by 17% year over year in 2023. Considering the company’s decade-long presence in the market, its rapid revenue growth – surpassing $2 billion in just three years – is remarkable.
Furthermore, Palantir’s financial profile remains robust. The company’s operating margin expanded from 22% to 28% in 2023, resulting in free cash flow of $730 million, a substantial 260% increase from the previous year. As a consistently profitable company, Palantir qualifies for inclusion in the S&P 500, which may attract institutional investors and boost its market standing.
Investors should note that Palantir is a growth stock and tends to experience volatility. The company’s stock currently trades at a premium compared to its peers, with a price-to-sales ratio of 25.7. However, recent earnings have caused a surge in Palantir’s valuation, indicating potential future growth.
Attempting to time the market by waiting for a dip in Palantir’s stock price is unreliable. Instead, a prudent strategy for investors is to gradually accumulate shares through dollar-cost averaging. Palantir’s strong performance in 2023 suggests a promising future, as it establishes itself as a leader in AI-powered services.
While the benefits of AI may still be years away, Palantir’s AI capabilities and market presence make it an appealing investment opportunity. Existing and prospective investors may want to consider taking advantage of the current moment to acquire shares and ride the company’s expected growth trajectory.
