Palantir Technologies Inc (NASDAQ: PLTR) is trading at record levels of about $170 in premarket after reporting more than $1.0 billion in quarterly revenue for the first time since its inception in 2003.
PLTR shares are now trading at an eye-watering price-to-earnings (P/E) ratio of nearly 450. Still, Piper Sandler analyst Brent Bracelin remains bullish as ever on the big data analytics firm.
Including post-earnings gains, Palantir stock is up an exciting 130% versus its low in early April.
What could possibly justify Palantir’s stock valuation
Piper Sandler currently has a $170 price target on Palantir stock, which is roughly in line with the price at which it’s trading at the time of writing.
However, the investment firm assumes a durable growth rate of about 30% only through the end of this decade, while Alex Karp, the chief executive of Palantir Technologies, told CNBC he’s committed to 10x growth in revenue over the next five years.
While ambitious, Karp’s remarks signal there’s room for upward revisions in PLTR shares, which could, in fact, push further up from here – especially if management delivers on that 10x forecast in the years ahead.
Note that a senior Wedbush analyst, Dan Ives, also believes the Nasdaq-listed firm could soon join the trillion-dollar club on sovereign and corporate AI spending within the next few years.
Why Bracelin is all but positive on PLTR shares
Bracelin recommends looking beyond valuation and owning PLTR stock for the long term, mostly because the Denver-headquartered firm is growing at an incredibly fast clip.
“They guided for 38% growth at the midpoint, they grew 48%,” the analyst noted in an interview with CNBC, adding Q2 marked the company’s eighth consecutive quarter of increasing top-line growth.
More importantly, free cash flow margins coming in at more than 50% at just $4.0 billion scale in the second quarter and the management raising guidance to another 50% annualised growth in Q3 paints a rosy picture of what the future holds for Palantir shares.
All in all, the company’s earnings release confirms it’s “more than a meme … uniquely positioned as an AI infrastructure winner” for the coming years.
How to play Palantir shares after Q2 earnings
Despite his bullish remarks following the company’s strong quarter and amazingly upbeat outlook, Piper Sandler analyst Brent Bracelin says a smarter way of playing Palantir shares after Q2 release is to buy them on pullbacks.
The good news is that the market is playing for the short run. We’ve had multiple points where the stock has pulled back. I think there will be opportunities to get more aggressively involved in PLTR stock.
Simply put, Bracelin is convinced that Palantir Technologies will be a much bigger business in a few years than it is today – but said it wouldn’t hurt to wait for a better entry point in this AI stock.
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