Palantir Technologies has been a standout performer in the stock market this year, with its shares skyrocketing over 250%. The company’s success can be attributed to its ability to secure clients and drive revenue growth. Palantir’s projected revenues for 2024 are expected to be between $2.805 billion and $2.809 billion, a year-over-year increase of 26.2%.
Much of this growth is driven by Palantir’s expanding client base, particularly in the American commercial sector, which accounts for more than 80% of new private sector clients. The company’s recent inclusion in the Dow Jones Industrial Average (DJIA) and its upcoming transition from the New York Stock Exchange to NASDAQ are likely to further boost its stock performance. However, top investor Daniel Jones believes that Palantir’s valuation has become excessive.
Jones points out that even with aggressive annual growth of 40% over the next few years, Palantir’s valuation multiples would still be considered high by 2027. He warns investors to be cautious, stating, “Beware the bottom falling out.”
On Wall Street, Palantir has a Hold consensus rating based on a mix of Buy, Hold, and Sell recommendations from analysts.
Palantir’s expanding client base
The company’s 12-month average price target of $33.73 suggests a potential downside of around 45% from its current trading levels. Palantir’s strong financial results can be attributed to the high demand for its artificial intelligence (AI) platform. The company specializes in data analytics and AI, with its core platforms, Foundry and Gotham, helping organizations integrate complex data, develop machine learning models, and gain insights to improve decision-making.
Forrester Research has recognized Palantir as a leader in the AI/ML platforms market, which is expected to grow at an annual rate of 41% through 2028. Palantir’s CEO, Alex Karp, emphasized the transformative impact of their newest platform, AIP, on the business. Despite the company’s impressive growth and market position, investing in Palantir presents a challenge due to its high valuation.
The stock currently trades at 175 times adjusted earnings, which may be considered expensive compared to its peers, even when accounting for the projected growth in the AI/ML platforms market. Investors considering Palantir should carefully evaluate the company’s financials and valuation before making investment decisions. Alternative AI stocks trading at more reasonable valuations may present less risk for potential investors.
