Should You Buy Palantir Stock at Its Peak?
Palantir Technologies (NYSE: PLTR) has recently emerged as a standout in the rapidly growing field of artificial intelligence (AI). Despite being in operation for nearly two decades, the company’s earnings have surged over the past year, thanks to its new Artificial Intelligence Platform (AIP) and a growing interest from commercial customers. Traditionally known for its government contracts, Palantir is now seeing rapid expansion in the private sector.
This shift has driven Palantir’s stock to soar by 150% this year, pushing it to record highs. Currently, the stock is trading well above Wall Street’s average price target of $28, prompting investors to question whether it’s wise to buy Palantir at such elevated levels. Let’s explore this further.
A Game-Changer for Data
Palantir’s core business revolves around helping governments, companies, and organizations manage and utilize data more effectively. While this may not seem exciting at first glance, Palantir’s solutions often result in significant cost savings and improved efficiency for its customers.
For instance, Palantir’s system at Cleveland Clinic optimizes patient placement and forecasts bed availability, significantly enhancing the hospital’s efficiency. Similarly, United Airlines uses Palantir to manage equipment issues, reducing flight delays and cancellations, saving the airline millions of dollars.
In the past, government contracts were Palantir’s primary revenue driver, but the company has seen remarkable growth in its commercial business, especially since the launch of AIP. U.S. commercial revenue surged by 55% in the most recent quarter, with commercial customer growth jumping 83%. In just four years, Palantir’s U.S. commercial customers grew from 14 to nearly 300.
Early Days of AIP Growth
Palantir’s AIP platform is still in its infancy, yet demand has already been overwhelming. CEO Alex Karp described the demand as “persistent and unbridled,” and it shows no signs of slowing down. Palantir has been running AIP boot camps to familiarize potential customers with the platform, allowing them to implement use cases quickly. This strategy has proven effective, with the company closing high-value deals shortly after these boot camps.
Palantir’s latest quarterly earnings reflect this growth, with net income hitting $134 million—its highest quarterly profit to date.
Is It Time to Buy Palantir?
Given Palantir’s success and strong growth potential, the stock presents an intriguing opportunity. However, at more than 122x forward earnings estimates, Palantir is trading at a premium. For comparison, this makes Palantir more expensive than the “Magnificent Seven” tech stocks that have driven market gains this year.
For value-focused investors, Palantir might not be the right pick. Similarly, growth investors seeking bargains might hesitate at these levels. However, for those willing to pay a premium now, Palantir could offer significant long-term rewards. The company is in the early stages of a new growth phase fueled by AIP and growing commercial demand, and the AI market as a whole is expected to grow exponentially in the coming years. With the AI market potentially reaching $1 trillion by the end of the decade, Palantir’s future looks promising.
Even though Palantir stock is trading at a high today, long-term investors may still see considerable gains as the company continues to grow and capitalize on the expanding AI industry.