Wedbush Securities analyst Dan Ives said: Palantir Technologies (PLTR -0.53%) It’s probably the best pure artificial intelligence (AI) stock on the market. He also called the company an “undiscovered gem” after its fourth-quarter earnings report highlighted unprecedented demand for its new platform.
Ives calls AI the fourth industrial revolution and likens its potential impact to the advent of the internet and the invention of the smartphone. These technologies have created great wealth for investors, and the AI boom could be just as lucrative.
Here’s what investors need to know about Palantir.
Palantir shocks the market with Q4 report
Palantir shares soared 19% after the company reported encouraging fourth-quarter results. Although growth in the government sector remained slow, sales rose 20% to $608 million due to strong demand for AIP (artificial intelligence platform) among commercial customers. Ultimately, as Palantir focused on cost control, his generally accepted accounting principles (GAAP) net income tripled to $93 million.
The flowchart below details the company’s performance for the fourth quarter.
Graph by author. Above is a visualization of Palantir’s fourth quarter financial results.
Another notable development in the fourth quarter was a 35% year-over-year increase in customer numbers, driven in particular by momentum in the commercial sector. Palantir’s customer base is still relatively small at 497 companies, so expansion is promising because it allows the company to spread its revenue across a larger footprint. In other words, the risk associated with highly concentrated returns is gradually decreasing.
Palantir is a leader in artificial intelligence and machine learning platforms
According to research, the IT categories most likely to see spending growth in 2024 are artificial intelligence (AI) and analytics. morgan stanley. Palantir is well-positioned to benefit because its business sits between these technologies.
Specifically, the platform integrates data and machine learning (ML) models to build ontologies, which are maps that define relationships between digital information and physical assets. Users can run ontology data through pre-built analytical tools and custom applications to glean insights that improve decision-making and operational efficiency. In short, Palantir provides a framework that helps businesses use AI to create real value.
Industry analysts recognize Palantir as a leader in AI/ML platforms and ModelOps, an area related to model development, evaluation, and deployment. The company is leaning into the demand for generative AI with AIP, a new product that brings support for large-scale language models to its existing analytics platform. AIP has been a huge success so far.
To quote CEO Alex Karp’s letter to shareholders: “It used to take weeks, if not longer, to set up a data integration and analytics software platform and integrate it with a customer’s existing systems. Instead of taking months, AIP can now be up and running in just two hours.” “He also commented that the demand for AIP is unlike anything seen in his 20-year history of the company.
Palantir restructured its go-to-market strategy around the AIP Boot Camp. AIP Bootcamp is his 5-day event where current and future customers learn how to apply her AIP to real-world use cases involving data from their businesses. Chief Revenue Officer Ryan Taylor said the bootcamp is shortening sales cycles and accelerating enterprise customer acquisition, leaving room for efficiency improvements to continue growing margins over time. .
Palantir stock looks a little expensive at its current valuation.
Palantir helps clients build data-driven intelligence applications that solve complex, high-value use cases. forrester research. Its platform is ideal for companies with large data requirements and who want to deploy AI quickly. The market recognizes this to some extent. Palantir is 2nd place (runner-up) microsoftAI software market share will increase in 2022, according to International Data Corp. AIP should help the company maintain its momentum.
With this in mind, Straits Research expects the big data analytics market to grow at 14% annually through 2031. Meanwhile, Grand View Research believes that the artificial intelligence market will expand at 37% per year until 2030. Palantir should benefit from both tailwinds. The company’s top-line growth should fall in between these estimates.
Wall Street expects the company to grow its revenue by 21% annually over the next five years. In that context, the current valuation of 24.3 times sales looks expensive, especially considering his two-year average of 12.9 times sales. Investors who want to own this stock can buy a very small position today, but it would be wise to wait for a lower price before building a large position.
Finally, while Wall Street analysts may identify certain companies as the best AI stocks, no analyst will advise you to focus your money on a single brand. It would be much smarter to spread your money across a basket of AI stocks. Investors should keep this in mind when setting up their portfolios to take advantage of the AI boom.
