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Palantir Stock Hits All-Time High: Wait for a Pullback or Buy?
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Shares of Palantir Technologies Inc. (PLTR - Free Report) hit an all-time high of $63.39 on Nov. 13 before closing a tad lower at $60.7.
It has risen a whopping 180.3% in the past six months. This rally significantly outperforms the broader industry’s 34.8% rise and the Zacks S&P 500 composite’s 14.1% growth.
6 Months Price Performance
Image Source: Zacks Investment Research
The stock is trading above its 50-day moving average, an indication of bullish sentiment among investors.
PLTR Stock Trades Above 50-Day Average
Image Source: Zacks Investment Research
PLTR stock’s consistent surge reflects optimism among investors, many of whom are eager to tap into the rapidly growing artificial intelligence (AI) market. The interest in AI stocks has been widespread, with significant gains seen across the sector. For instance, NVIDIA (NVDA - Free Report) has gained 55%, International Business Machines (IBM - Free Report) has climbed 25% and Oracle (ORCL - Free Report) has gained 56% in the past six months.
With Palantir's continued rise, many investors face the dilemma of whether to jump in now or wait for a potential pullback. Let’s delve deeper.
Palantir's Flexible Sales Strategy
Palantir focuses on catering to businesses seeking tailored AI/ML services, particularly attracting large government and corporate clients willing to invest heavily in its systems. However, the company recognized the need to broaden its customer base. To address this, Palantir adopted a modular sales approach, allowing clients to purchase specific product components instead of committing to the full platform upfront. This model also incorporates usage-based pricing, which lowers the entry barrier for new clients. By starting small, clients can gradually increase their spending as they scale their usage of Palantir's solutions. Consequently, the company has seen significant growth in its U.S. commercial customer base.
Strong AI and Data Analytics Positioning
Palantir’s AI strategy is comprehensive, combining its proprietary Foundry and Gotham platforms with a solid plan to promote AI adoption across both government and commercial sectors. Its AI Platform (AIP) is the backbone of these capabilities, enabling organizations to process large datasets and derive real-time insights. This is especially valuable in sectors requiring extensive data integration, such as defense, healthcare, finance and intelligence, where operational efficiency and decision-making speed are critical.
In the government sector, Palantir is aligning its AI strategy with U.S. defense priorities. Its work on high-profile initiatives, such as the Department of Defense’s Open DAGIR project, underscores its role in modernizing military operations through AI-driven solutions. These initiatives enhance data interoperability and improve real-time decision-making capabilities, solidifying Palantir’s position as a key player in the defense sector.
In the commercial space, Palantir's AIP boot camps — providing hands-on experience to over 1,000 companies — have proven instrumental in customer acquisition. These boot camps not only showcase the platform’s capabilities but also demonstrate its adaptability across industries like logistics, manufacturing and supply chain management.
In the third quarter of 2024, Palantir’s U.S. government revenues grew 40% year over year, driven by strong demand for its AI-powered products. U.S. commercial revenues also surged 54%, fueled by the success of AIP. Additionally, the company reported a 183% year-over-year increase in operating income and a 900 basis points increase in adjusted operating margin, reflecting improved cost management and higher-margin government contracts.
PLTR’s Strong Balance Sheet
An analysis of the stock would be incomplete without highlighting management's ability to efficiently accumulate profits, given Palantir's strong financial standing. As of Sept. 30, the company held $4.6 billion in cash and had no debt, providing it with significant financial flexibility. This robust cash position allows Palantir to pursue new ventures or acquisitions without financial strain, strengthening its long-term growth potential.
S&P 500 Inclusion: An Added Advantage
Palantir was officially added to the S&P 500 on Sept. 23, following its consistent financial performance, including seven consecutive quarters of profitability. The inclusion is expected to boost demand for its shares, particularly from index funds and ETFs, while enhancing the company's visibility and investor base.
PLTR's Top and Bottom-Line Prospects Remain Robust
The Zacks Consensus Estimate for PLTR’s fourth-quarter 2024 earnings is pegged at 11 cents, indicating 37.5% growth from the year-ago level. Earnings in 2024 and 2025 are expected to increase 52% and 24.6%, respectively, from the prior-year actuals. The company’s sales are expected to increase 28% year over year in the fourth quarter of 2024. Sales are expected to rise 26.6% and 24.5% year over year, respectively, in 2024 and 2025.
This positive outlook is reinforced by upward estimate revisions. In the past 30 days, six estimates for fourth-quarter 2024 earnings have been revised upward, with no downward revisions, reflecting strong analyst confidence in the company. The Zacks Consensus Estimate for third-quarter 2024 earnings has increased 10% during this period. For 2024 and 2025, eight and seven estimates moved north, respectively, in the same time frame, with no southward revision for 2024 and one for 2025.
Image Source: Zacks Investment Research
PLTR is a Buy
Given Palantir’s leadership in the AI sector, its robust financial performance, a strong cash position and positive earnings outlook, the stock is a compelling buy. While it has already seen significant gains, the growing demand for AI solutions, continued government contracts and its inclusion in the S&P 500 suggest further upside potential. Investors looking to capitalize on AI-driven growth should consider adding Palantir to their portfolios.
Image: Bigstock
Palantir Stock Hits All-Time High: Wait for a Pullback or Buy?
Shares of Palantir Technologies Inc. (PLTR - Free Report) hit an all-time high of $63.39 on Nov. 13 before closing a tad lower at $60.7.
It has risen a whopping 180.3% in the past six months. This rally significantly outperforms the broader industry’s 34.8% rise and the Zacks S&P 500 composite’s 14.1% growth.
6 Months Price Performance
The stock is trading above its 50-day moving average, an indication of bullish sentiment among investors.
PLTR Stock Trades Above 50-Day Average
PLTR stock’s consistent surge reflects optimism among investors, many of whom are eager to tap into the rapidly growing artificial intelligence (AI) market. The interest in AI stocks has been widespread, with significant gains seen across the sector. For instance, NVIDIA (NVDA - Free Report) has gained 55%, International Business Machines (IBM - Free Report) has climbed 25% and Oracle (ORCL - Free Report) has gained 56% in the past six months.
With Palantir's continued rise, many investors face the dilemma of whether to jump in now or wait for a potential pullback. Let’s delve deeper.
Palantir's Flexible Sales Strategy
Palantir focuses on catering to businesses seeking tailored AI/ML services, particularly attracting large government and corporate clients willing to invest heavily in its systems. However, the company recognized the need to broaden its customer base. To address this, Palantir adopted a modular sales approach, allowing clients to purchase specific product components instead of committing to the full platform upfront. This model also incorporates usage-based pricing, which lowers the entry barrier for new clients. By starting small, clients can gradually increase their spending as they scale their usage of Palantir's solutions. Consequently, the company has seen significant growth in its U.S. commercial customer base.
Strong AI and Data Analytics Positioning
Palantir’s AI strategy is comprehensive, combining its proprietary Foundry and Gotham platforms with a solid plan to promote AI adoption across both government and commercial sectors. Its AI Platform (AIP) is the backbone of these capabilities, enabling organizations to process large datasets and derive real-time insights. This is especially valuable in sectors requiring extensive data integration, such as defense, healthcare, finance and intelligence, where operational efficiency and decision-making speed are critical.
In the government sector, Palantir is aligning its AI strategy with U.S. defense priorities. Its work on high-profile initiatives, such as the Department of Defense’s Open DAGIR project, underscores its role in modernizing military operations through AI-driven solutions. These initiatives enhance data interoperability and improve real-time decision-making capabilities, solidifying Palantir’s position as a key player in the defense sector.
In the commercial space, Palantir's AIP boot camps — providing hands-on experience to over 1,000 companies — have proven instrumental in customer acquisition. These boot camps not only showcase the platform’s capabilities but also demonstrate its adaptability across industries like logistics, manufacturing and supply chain management.
In the third quarter of 2024, Palantir’s U.S. government revenues grew 40% year over year, driven by strong demand for its AI-powered products. U.S. commercial revenues also surged 54%, fueled by the success of AIP. Additionally, the company reported a 183% year-over-year increase in operating income and a 900 basis points increase in adjusted operating margin, reflecting improved cost management and higher-margin government contracts.
PLTR’s Strong Balance Sheet
An analysis of the stock would be incomplete without highlighting management's ability to efficiently accumulate profits, given Palantir's strong financial standing. As of Sept. 30, the company held $4.6 billion in cash and had no debt, providing it with significant financial flexibility. This robust cash position allows Palantir to pursue new ventures or acquisitions without financial strain, strengthening its long-term growth potential.
S&P 500 Inclusion: An Added Advantage
Palantir was officially added to the S&P 500 on Sept. 23, following its consistent financial performance, including seven consecutive quarters of profitability. The inclusion is expected to boost demand for its shares, particularly from index funds and ETFs, while enhancing the company's visibility and investor base.
PLTR's Top and Bottom-Line Prospects Remain Robust
The Zacks Consensus Estimate for PLTR’s fourth-quarter 2024 earnings is pegged at 11 cents, indicating 37.5% growth from the year-ago level. Earnings in 2024 and 2025 are expected to increase 52% and 24.6%, respectively, from the prior-year actuals. The company’s sales are expected to increase 28% year over year in the fourth quarter of 2024. Sales are expected to rise 26.6% and 24.5% year over year, respectively, in 2024 and 2025.
This positive outlook is reinforced by upward estimate revisions. In the past 30 days, six estimates for fourth-quarter 2024 earnings have been revised upward, with no downward revisions, reflecting strong analyst confidence in the company. The Zacks Consensus Estimate for third-quarter 2024 earnings has increased 10% during this period. For 2024 and 2025, eight and seven estimates moved north, respectively, in the same time frame, with no southward revision for 2024 and one for 2025.
Image Source: Zacks Investment Research
PLTR is a Buy
Given Palantir’s leadership in the AI sector, its robust financial performance, a strong cash position and positive earnings outlook, the stock is a compelling buy. While it has already seen significant gains, the growing demand for AI solutions, continued government contracts and its inclusion in the S&P 500 suggest further upside potential. Investors looking to capitalize on AI-driven growth should consider adding Palantir to their portfolios.
PLTR currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.