Achi news desk-
The excitement surrounding artificial intelligence (AI) is fueling the markets to new heights. Both the S&P 500 a Nasdaq Composite has eclipsed new records only during the first months of the year.
Many of these gains are thanks to the “Magnificent Seven” – a catchy moniker used to describe the world’s biggest companies including Microsoft, An apple, Nvidia, Alphabet, Amazon, Teslaa Meta Platforms. But smart investors understand that there are many other opportunities in the AI ​​world besides megacap technology.
One company that is emerging as a leader is a big data analytics software company Palantir Technologies (NYSE: PLTR). 2023 was a special year for the company as it released its fourth major product: Palantir’s Artificial Intelligence Platform (AIP).
AIP’s massive success helped accelerate Palantir’s revenue and profits—and investors took notice. But with shares up almost 180% in the last year, is it too late to buy the company’s stock?
Wedbush Securities analyst Dan Ives thinks the stock has much more room to grow. Its price target of $35 per share implies about 59% upside to the company’s current trading levels, at the close of the market on April 10.
Read on to find out why picking up shares in Palantir could be a lucrative opportunity right now.
The Rise of Palantir’s Artificial Intelligence Platform
For many years, Palantir sold three core software products: Apollo, Gotham, and Foundry. But last April, he quietly announced that he was looking into artificial intelligence (AI) following the release of AIP. But AIP’s launch was largely overshadowed by the moves big tech was making – including investments in ChatGPT developer OpenAI and its rivals.
To spread the word about AIP, Palantir used a creative lead generation strategy. Namely, the company started holding immersion seminars called “boot camps.” During these sessions, potential customers were able to demonstrate Palantir’s various software platforms. The idea behind this was to demonstrate Palantir’s technology chops in a tangible way while simultaneously helping business leaders identify and formulate a use case related to artificial intelligence (AI).
Since the start of this campaign, Palantir has hosted over 850 bootcamps. Furthermore, AIP customers have publicly demonstrated how the product is being used to uncover new insights across a myriad of applications.
Although AIP has only been commercially available for about a year, its initial success is encouraging. Palantir grew its customer count by 35% year over year in 2023 and is making inroads in the private sector. During the fourth quarter alone, the company grew its US commercial revenue operation by a staggering 70%.
The journey has just begun
Sure, revenue acceleration is always nice to see. For Palantir, it’s especially meaningful because the company has received some pushback from Wall Street skeptics over the years – many of whom see the company as too reliant on lumpy government deals with the US Military and its allies Western.
However, AIP proves that Palantir has legitimate technical capabilities that attract customers from a host of industries outside of the public sector. Given the big tech pulse in the overall AI landscape, Palantir is proving it can compete with the biggest companies.
I see 2023 as the first chapter in a long story in the AI ​​narrative for the company. It’s moving fast, and other tech behemoths are eager to work with Palantir’s AIP. It is well positioned to continue to generate solid revenue growth while maintaining a healthy profitability profile and a strong balance sheet.
Premium pricing that is worth the price
The chart below shows Palantir benchmarked against a cohort of other leading software-as-a-service (SaaS) businesses on a price-to-sell (P/S) basis. At a P/S of 23.1, Palantir is the most expensive stock among this peer set, based on that metric.
Palantir’s valuation multiples expanded dramatically following its stunning fourth-quarter earnings report in February. Since then, the stock has experienced some momentum and is only now starting to take a breather.
Furthermore, it’s not just revenue growth that’s impressive for Palantir. The overall financial picture of the company is strong. The success of the boot camps has allowed Palantir to keep sales and marketing costs relatively low. As such, the company is consistently profitable – unlike many of its competitors.
In 2023, Palantir expanded its operating margin by 6%. This bottomed out, as the company generated $730 million in free cash flow in 2023 – up more than threefold year over year.
With shares trading at such a premium compared to the competition, investors may be tempted to sell and book some profits. But I would encourage investors to zoom out and look at the bigger picture.
Although AIP has been a catalyst for Palantir’s business and played an influential role in the excitement that pushes the stock higher, the company’s shares are still down 40% from their all-time highs. Now is a great time to acquire shares, as Palantir continues to capitalize on the long-term secular themes of AI.
Using dollar cost averaging is a prudent strategy to start a position or add to an existing one. With so much upside potential, it’s hard to overlook Palantir.
Should you invest $1,000 in Palantir Technologies right now?
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Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Randi Zuckerberg, former director of market development and spokesperson for Facebook and sister of Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool’s board of directors. Adam Spatacco holds positions at Alphabet, Amazon, Apple, Meta Platforms, Microsoft, Nvidia, Palantir Technologies, and Tesla. The Motley Fool has positions and recommends Alphabet, Amazon, Apple, Datadog, Meta Platforms, Microsoft, MongoDB, Nvidia, Oracle, Palantir Technologies, Salesforce, ServiceNow, Snowflake, and Tesla. The Motley Fool recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.
Once-in-a-Generation Investment Opportunity: 1 Stock to Buy Temporarily in April Before It Surges 55%, According to 1 Wall Street Analyst was originally published by The Motley Fool
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