The past yr has been outstanding for Palantir Technologies (NYSE: PLTR) investors. Share prices of the company, which provides data-analysis-focused software platforms to governments and businesses, shot up a whopping 163%. Even higher, the red-hot rally shows no signs of slowing. Palantir stock jumped 31% in a single session after the company released fourth-quarter 2023 results on Feb. 5.
Let’s take a have a look at why investors are excited after which take a have a look at the catalysts that might send this high-flying tech stock higher over the next yr.
Palantir expects a much greater profit in 2024
Palantir’s fourth-quarter revenue increased 20% yr over yr to $608 million, while non-GAAP earnings doubled to $0.08 per share. Analysts anticipated Palantir would report $0.08 per share in earnings on revenue of $603 million. It is often value noting that the company ended the yr with a generally accepted accounting principles (GAAP) profit of $210 million, making 2023 Palantir’s first profitable yr since it was founded in 2003.
The entire-year GAAP profit exceeded analysts’ expectations of $194.5 million. What’s more, Palantir’s forecast for 2024 is ahead of consensus estimates. The company anticipates full-year revenue to land at $2.66 billion, an increase of 19% over last yr. That will probably be an acceleration over the company’s 2023 revenue growth of 17% to $2.23 billion. Analysts had pegged revenue estimates at $2.64 billion.
What’s more, Palantir has guided for an adjusted operating income of $842 million this yr on the midpoint, exceeding consensus estimates of $760 million by an enormous margin. The operating income guidance points toward a substantial jump of 33% from 2023 levels of $633 million, indicating that Palantir could deliver strong earnings growth over again this yr.
Nonetheless, don’t be surprised to see Palantir’s revenue and earnings grow at a faster pace than its expectations in 2024, as a result of the robust demand for the company’s artificial intelligence (AI) solutions.
AI could help the company clock stronger growth
Palantir has witnessed a remarkable acceleration in deal momentum of late. The company struck 103 deals value $1 million or more inside the fourth quarter of 2023, which was nearly twice the number inside the prior-year period. Of those, 21 deals were value $10 million or more, while 37 deals were value on the very least $5 million.
It looks like the AI boot camps that Palantir organized last yr are translating into more customer wins. These boot camps were organized to help organizations apply Palantir’s Artificial Intelligence Platform (AIP) of their operations. Management identified on the most recent earnings conference call that the company has “achieved greater than 560 boot camps across 465 organizations so far,” and is “deploying AIP to implement an entire lot of real tangible use cases in production for our customers.”
These boot camps are driving tangible growth for Palantir, with Ryan Taylor, the company’s Chief Revenue Officer and Chief Legal Officer, stating:
We’re already seeing evidence of boot camps helping to significantly compress sales cycles and speed up the speed of recent customer acquisition … And we greater than doubled the variability of U.S. business deals with [total contract value] TCV of $1 million or more from the fourth quarter in 2022 to 2023.
Furthermore, Palantir is witnessing a jump in customer spending. The TCV of its U.S. business customers was up 107% yr over yr and 42% on a sequential basis in Q4. All this explains why Palantir’s business revenue increased 32% yr over yr inside the previous quarter to $284 million, outpacing its overall revenue growth.
Not surprisingly, Palantir is targeted on “accelerating the speed of boot camps with current and prospective customers,” which could eventually help the company sustain the impressive growth of its business revenue over the next yr and beyond. This explains why analysts have substantially increased their revenue growth expectations from Palantir.
How much upside can investors expect over the next yr?
Palantir stock trades at 22.5 times sales. Investors may be wondering whether it’s value buying Palantir at this valuation, especially considering the stock’s big post-earnings surge. Nonetheless, the company can justify its sales multiple as a result of the impressive jump in its deal momentum that might eventually help it outperform expectations. Also, as the following chart suggests, Palantir’s forward sales multiple is at a much lower level as a result of the expansion it’s anticipated to deliver.
Furthermore, the massive gap between Palantir’s trailing and forward earnings multiples points toward a solid jump in the company’s earnings.
So, investors would do well to look past Palantir’s valuation, especially considering that the market may reward it with a premium valuation as a result of the robust AI opportunity that’s accelerating its growth. Despite the whole lot, the deployment of Palantir’s AIP led to a healthy 56% year-over-year growth in billings last quarter to $605 million. Remaining performance obligations, which consult with the entire value of contracts to be fulfilled in the long term, increased 28% yr over yr to $1.24 billion.
All which means Palantir could end 2024 with more revenue than it’s currently anticipating. Assuming Palantir delivers 25% revenue growth in 2024, its top line could hit almost $2.8 billion. If the market rewards it with a price-to-sales ratio of 25 after a yr as a result of its improving growth, Palantir’s market cap could hit $70 billion in a yr.
That will probably be a 47% increase from current levels, which is why investors searching for to purchase an AI stock immediately should consider buying Palantir before it surges higher.
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Harsh Chauhan has no position in any of the stocks mentioned. The Motley Idiot has positions in and recommends Palantir Technologies. The Motley Idiot has a disclosure policy.
Where Will Palantir Technologies Stock Be in 1 12 months? was originally published by The Motley Idiot