Palantir Demonstrates Superior Insight over Wall Street, Foreseen by One Analyst's Prognostication.
Palantir Demonstrates Superior Insight over Wall Street, Foreseen by One Analyst's Prognostication.
There was a lot of criticism directed at Palantir Technologies (PLTR 0.15%) in the run-up to its financial release, much of it negative. The stock has surged remarkably over the past couple of years, gaining 545% since early last year, thanks to the accelerating adoption of artificial intelligence (AI). This growth has led to an increase in Palantir's valuation, causing some naysayers to raise concerns.
The company presented its financials after the market closed on Nov. 4, and it's safe to say that Palantir surpassed expectations. The data analysis and AI specialist easily surpassed analysts' predictions and further boosted its performance by raising its full-year guidance.
Many on Wall Street were taken aback by Palantir's performance, but one analyst predicted that the company was being underestimated.
Let's delve into Palantir's financials and see what this means for the future.
Full Steam Ahead
For the third quarter, Palantir recorded revenue of $726 million, a 30% increase year over year and a 7% increase quarter over quarter. This resulted in adjusted earnings per share (EPS) of $0.10, an increase of 43%. These figures far exceeded analysts' estimates, which predicted revenue of $701 million and EPS of $0.09.
The results were largely driven by U.S. commercial revenue, which grew 54% year over year and 13% sequentially, well beyond management's projected growth rate of at least 47%. U.S. government revenue also contributed, increasing by 40%.
Customer growth was equally impressive. Palantir's customer base expanded by 39% year over year, primarily due to a 77% increase in U.S. commercial customers. The company also secured 104 deals worth at least $1 million, of which 36 were worth $5 million and 16 were worth $10 million.
Not only was Palantir driving strong current growth, but it also set the stage for future profitability. The company's remaining performance obligation (RPO) -- or sales yet to be recognized as revenue -- climbed 59% year over year to $1.6 billion. It's positive when RPO grows faster than current revenue, as this suggests that the company's growth trend is sustainable.
Palantir's strength lies in its AI Platform (AIP), which has seen strong demand from customers. The company has adopted an innovative approach, offering boot camps that pair users with its engineers to develop viable solutions. The results are clear. Management reported numerous seven-figure deals signed within weeks of customers participating in Palantir's boot camps.
To top it off, Palantir increased its full-year revenue guidance to $2.8 billion, representing a 26% year-over-year growth rate after several quarters of accelerating growth. The company also raised its adjusted profit and free cash flow projections. The primary driver of its revised outlook is the U.S. commercial segment, as management now projects growth of 50%, up from its earlier forecast of 40% growth.
One analyst was hardly surprised
Wedbush analyst Dan Ives wasn't at all surprised by the outcome. In September, the long-time Palantir supporter noted that "more and more enterprises" were exploring how they could deploy AI in 2025. Ives highlighted Palantir's "enterprise AI strategy" as a "game changer" for the company, leading him to reiterate his "outperform (buy)" rating and increase his price target to $45. Some analysts had grown cautious, expressing concerns about Palantir's high valuation.
Following Palantir's impressive performance, which Ives described as "a masterpiece," the analyst upped his price target to $57. He cited the "explosive demand" for his bullish viewpoint while also acknowledging the rapid pace of "new customer conversions and existing deal expansions."
These results support Ives' (and my) optimistic view. It's important to note, however, that not every investor will see Palantir as an attractive investment, given its high valuation and the stock's inherent volatility. A setback -- real or perceived -- could send Palantir tumbling. If you have any reservations, review the stock's performance between 2021 and 2023, when Palantir lost nearly 73% of its value.
The market for generative AI is projected to be worth between $2.6 trillion and $4.4 trillion over the next decade, according to global management consulting firm McKinsey & Company. If Palantir can claim even a tiny piece of this opportunity -- and I believe it can -- the stock will be worth significantly more in five to ten years.
Given its consistent performance, enormous opportunity, and growing profitability, I believe Palantir is a worthwhile investment. For those hesitant due to the stock's high valuation, consider buying on dips or implementing a dollar-cost averaging strategy.
After presenting its impressive financial results, Palantir Technologies increased its full-year revenue guidance, signaling continued growth. This increase in Guidance is a testament to the company's strong financial position and potential for future profitability in the field of artificial intelligence. Investors looking to capitalize on Palantir's success might consider diversifying their portfolio by investing in this high-potential stock.
The impressive financial performance of Palantir Technologies has further boosted its valuation, making it an attractive target for investors. Given the company's strong standing in the AI market and the significant potential of the generative AI market, some analysts, like Dan Ives, believe that Palantir could potentially significantly increase in value within the next decade.