Consider Ditching Palantir and Investing in These Two Tech Companies Instead?
Palantir Technologies (PLTR), currently experiencing a 360% surge over the past year, has become a darling of AI enthusiasts. The drive behind this soaring stock price stems from accelerated revenue growth, booming profits, and its addition to high-profile indexes. Palantir's revenue grew 17% in 2023, 29% in 2024, and predictions hint at a 31% climb in 2025. Moreover, the company turned profitable in 2023 and nearly doubled its earnings per share (EPS) in 2024. Analysts are optimistic about a 63% EPS growth in 2025.
This explosive growth is fueled by a burgeoning U.S. commercial business, a steady stream of government contracts, and the increasing use of its analytics platform to usher in new generative AI applications. Despite this hot streak, Palantir is trading at a hefty 385 times its projected 2025 earnings, with an enterprise value close to 70 times its 2025 sales forecast.
Given the enormous valuations, Palantir's stock poses significant risks. An abrupt price correction would render it expensively priced, despite its growth potential. In such a scenario, it might be prudent to invest in two AI stocks that offer more balanced risks and rewards: Accenture and AppLovin.
The methodical AI play: Accenture
Serving over 9,000 clients worldwide, Accenture is a global leader in IT services. Its operational reach spans numerous industries across 120+ countries. Its fiscal 2022 revenue increased by 15%, but growth slowed down to 4% in fiscal 2023 and 1% in 2024 due to rising interest rates, geopolitical tensions, and macroeconomic headwinds.
However, this slowdown was partially offset by a soaring GenAI business, which experienced a ninefold revenue surge from $100 million in 2023 to nearly $900 million in 2024, accounting for 1.4% of its total fiscal 2024 revenue. Analysts forecast a 7% revenue CAGR from 2024 to 2027 and an 11% EPS CAGR as companies invest more in digital transformation and cloud infrastructure, and the macroenvironment stabilizes.
Accenture, although not as explosively growth-oriented as Palantir, offers a balanced strategy to benefit from the ongoing expansion of the cloud, digital transformation, and AI markets. Despite a valuation of 28 times next year's projected earnings, it's a more moderate option, making it a potentially safer investment compared to the high-stakes Palantir.
The audacious AI play: AppLovin
AppLovin is well-known for publishing mobile apps and developing AI-powered tools to support other companies' app monetization. The company grew following a series of acquisitions between 2018 and 2022, including MoPub and Wurl.
AppLovin experienced a revenue plateau in 2022, turned unprofitable, and wasn't immune to the effects of a tough macro environment. However, it rebounded in 2023 with a 17% revenue increase and restored its profitability. In 2024, its revenue jumped by 43% due to a 73% surge in advertising revenue and a substantial increase in net income.
In its latest conference call, CEO Adam Foroughi discussed the company's AI development cycle and hoped that more advanced large language models (LLMs) and generative AI would help AppLovin's AXON ad discovery tools place ads more effectively.
Analysts forecast a 22% CAGR in revenue and a 42% growth in net income from 2024 to 2026, justifying the stock's hefty valuation of 80 times forward earnings. Its diverse exposure to the mobile app, digital advertising, and AI markets lends credence to its higher valuation deservingness, giving it more sustainable growth prospects than Palantir's meteoric surge over the past year.
- Given Palantir's current valuation of 385 times its projected 2025 earnings, some finance analysts are advocating for more balanced investment options, such as AI-focused companies like Accenture.
- Despite a deceleration in growth in recent years, with a 1% increase in revenue in 2024 due to macroeconomic challenges, Accenture's GenAI business still experienced a remarkable ninefold revenue surge, making it a compelling investment option for those seeking a moderated approach to AI investing.
- In contrast to Palantir's expected 31% revenue growth in 2025, which comes at a high valuation, Accenture's more moderate 7% revenue CAGR forecast from 2024 to 2027 indicates a more sustainable growth trajectory for those interested in investing in AI and digital transformation.
- With its unique focus on AI-powered mobile app monetization and ad placement, AppLovin offers an audacious AI play, boasting a 43% revenue increase in 2024 and a promising 22% CAGR forecast from 2024 to 2026, making it an appealing alternative to the stabilized yet explosive growth of Palantir Technologies.
