Palantir stock price has done well and is one of the best performers on Wall Street, helped by the ongoing artificial intelligence tailwinds. It has jumped by over 400% in the last 12 months, transforming it into a company valued at almost $200 billion. This article explores whether the PLTR stock is a good investment ahead of its earnings on Monday.
Palantir is benefiting from AI tailwinds
Palantir is a Peter-Thiel-backed technology company that provides its software solutions to companies and governments.
The firm has four major parts: AIP, Foundry, Gotham, and Apollo. AIP is its newly launched project that is taking advantage of the AI macro theme. It is a product that helps companies and governments build their AI tools easily.
Palantir’s Foundry solution helps companies and large organizations conduct data analytics easly, while Gotham is mostly used by government departments, especially in the defense segment. Palantir’s Apollo solution helps companies deploy software in large scale.
All these solutions have helped the company’s growth accelerate. Its annual revenue rose from $742 million in 2019 to over $2.26 billion in 2023 and $2.64 billion.
Palantir has also become profitable after substantial losses in the past few years. In the trailing twelve months, it made a net loss of over $1.16 billion in 2020 to a net income of $476 million.
PLTR growth is continuing
The most recent financial results showed that Palantir’s business continued doing well in the third quarter. Its US revenue jumped by 44%, while its total revenue was up by 30% to $726 million.
US commercial and government revenue rose 54% to 40% during the quarter. The company closed 104 deals worth over $1 million during the quarter.
Analysts expect the upcoming results to show that Palantir’s revenue rose by 27.7% in the fourth quarter to $776 million. That result will bring its annual revenue to $2.8 billion, a 26% from what it made a year earlier.
The company is expected to make $3.5 billion in 2025, a 24.90% increase from the $2.8 billion it will made in 2024.
Read more: Could Palantir stock fall by 25%? This analyst explains why
Good growth, but major issue remains
The biggest concern for Palantir is that it is one of the highest valued companies in the United States. With a market cap of $185 billion and an estimated 2025 revenue of $3.5 billion, it means that it has a forward price-to-sales ratio of 52.
In other words, assuming that its growth remains stagnant, it will take the company 52 years to get to $185 billion in annual revenue. These are huge numbers, considering that a company like NVIDIA has a forward P/S ratio of 24. NVIDIA has higher growth rate and margins than Palantir.
The price-to-sales ratio is not an important metric in analysis. The most notable numbers are the profits and the free cash flow. In this case, Palantir has a forward price-to-earnings ratio of 401, much higher than the sector median of 30. In contrast, NVIDIA has a forward P/E ratio of 45.
Palantir stock price analysis
The daily chart shows that the PLTR stock price has crashed to a record high, making it one of the biggest companies globally. However, there is a risk that it has formed a double-top chart pattern at $84.85. The neckline of this pattern is at $63.50.
Therefore, there is a risk that the Palantir stock price will crash to $63.50 later this year. The risk of that reversal will remain as long as it is below the double-top point at $63.50.
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