Wedbush Securities analyst Dan Ives has said Palantir Technologies (NYSE: PLTR) could be the proper pure-play artificial intelligence (AI) stock available in the marketplace. He also called the company an “undiscovered gem” following its fourth-quarter earnings report, which highlighted unprecedented demand for its recent platform.
Ives has referred to AI since the fourth industrial revolution, likening its potential impact to the looks of the net and the invention of the smartphone. Those technologies created significant wealth for investors, and the AI boom could be just as lucrative.
Here’s what investors should discover about Palantir.
Palantir impressed the market with its fourth-quarter report
Palantir stock soared 19% after the company reported encouraging financial ends within the fourth quarter. Revenue rose 20% to $608 million as a consequence of strong demand for AIP (Artificial Intelligence Platform) amongst industrial customers, though growth within the federal government segment remained muted. On the underside line, generally accepted accounting principles (GAAP) net income tripled to reach $93 million as Palantir leaned into cost control.
The flow diagram below provides more detail on the company’s performance in Q4.
One other noteworthy development in Q4 was the 35% year-over-year customer growth driven by especially strong momentum inside the economic segment. Palantir still has a relatively small clientele, with just 497 customers, so expansion is encouraging because it diversifies revenue across an even bigger base. In other words, the prospect related to highly concentrated revenue is slowly diminishing.
Palantir is a frontrunner in artificial intelligence and machine learning platforms
Artificial intelligence (AI) and analytics are the IT categories liable to see the most important spending increases in 2024, in response to a survey from Morgan Stanley. Palantir is well positioned to learn, provided that its business sits between those technologies.
Specifically, its platforms integrate data and machine learning (ML) models to construct ontologies, which are maps defining the connection between digital information and physical assets. Users can run ontology data through prebuilt analytics tools and custom applications, thereby gleaning insights that improve decision-making and operating efficiency. Briefly, Palantir provides frameworks that help businesses use AI to create real value.
Industry analysts have recognized Palantir as a frontrunner in AI/ML platforms and ModelOps, a discipline concerned with the event, evaluation, and deployment of models. The company is leaning into demand for generative AI with AIP, a recent product that brings support for large language models to its existing analytics platforms. AIP has thus far been a robust success.
To cite CEO Alex Karp’s shareholder letter: “It once took weeks and months, if not longer, for data integration and analytical software platforms to be arrange and integrated with a customer’s existing systems. AIP can now be up and running in as little as just just a few hours.” He also commented that demand for AIP is unlike anything the company has seen in its two-decade history.
Palantir has restructured its go-to-market strategy around AIP boot camps — five-day events through which current and prospective customers learn to make use of AIP to real-use cases involving data from their businesses. Chief Revenue Officer Ryan Taylor says boot camps are compressing sales cycles and accelerating commercial-customer acquisition, and that efficiency leaves room for continued margin expansion over time.
Palantir stock looks a bit expensive at its current valuation
Palantir helps clients construct data-driven intelligence applications that solve complex, high-value use cases, in response to Forrester Research. Its platform is nice for businesses with heavy data requirements that must deploy AI quickly. The market has realized that to some extent. Palantir ranked second (behind Microsoft) in AI software market share in 2022, in response to the International Data Corp. And AIP should help the company maintain its momentum.
With that in mind, Straits Research expects the big-data analytics market to expand at 14% annually through 2031. Meanwhile, Grand View Research believes the bogus intelligence market will compound at 37% annually through 2030. Palantir should take advantage of each tailwinds, and its top-line growth should land somewhere within the midst of those projections.
Wall Street expects the company to grow revenue at 21% annually over the next five years. In that context, the current valuation of 24.3 times sales looks pricey, especially when the two-year average is 12.9 times sales. Investors wanting to own this stock can buy a extremely small position today, nonetheless it might probably be prudent to attend for a inexpensive price before constructing out an enormous position.
As a final thought, Wall Street analysts may discover certain corporations as the proper AI stocks, but I doubt any analyst would advise concentrating money in a single brand. It could be far more prudent to spread capital across a basket of AI stocks. Investors should keep that in mind as they position their portfolios to capitalize on the AI boom.
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Trevor Jennewine has positions in Palantir Technologies. The Motley Idiot has positions in and recommends Microsoft and Palantir Technologies. The Motley Idiot has a disclosure policy.
This Is the Single Best Artificial Intelligence (AI) Stock to Buy, According to a Wall Street Analyst was originally published by The Motley Idiot