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By Shuvra Shankar Dey, Zacks Investment Research
Palantir Technologies Inc. PLTR has witnessed a remarkable 75.7% year-to-date rise, easily surpassing the broader industry’s 16.5% rally and the Zacks S&P 500 composite’s 16.9% growth.
Year-to-Date Price Performance
As of the last trading session, the stock closed at $30.16, just shy of its 52-week high of $33.12, and it continues to trade above its 50-day moving average. This reflects the prevailing optimism among investors, many of whom are eager to tap into the rapidly growing artificial intelligence (AI) market.
PLTR Stock Trades Above 50-Day Average
The strong interest in AI stocks has been widespread, with significant gains seen across the sector. For instance, NVIDIA NVDA is up 116.5%, International Business Machines IBM has climbed 27.3%, and Oracle (ORCL) has gained 36.6% over the past three months.
With Palantir's continued rise, many investors face the dilemma of whether to jump in now or wait for a potential pullback. So, is this the ideal time to buy PLTR shares? Let’s explore further.
AI Platform and Bootcamps: The Core of Palantir's Growth
Palantir's AI-driven solutions are at the heart of its business, particularly in strengthening defense capabilities amidst rising geopolitical tensions. A prime example is its recent $480 million U.S. defense contract for its AI system, Maven. The company’s revenue stream is well-balanced, with 55% coming from government contracts and 45% from commercial ventures. Palantir's focus on AI-driven data analytics, cybersecurity and information warfare positions it as a key player in the evolving global security landscape.
Palantir's Gotham platform, widely used by government entities, continues to secure long-term contracts, contributing to the company's solid double-digit sales growth and reliable cash flow. In the second quarter of 2024, Palantir's government revenues rose 23% year over year, with U.S. government revenues increasing 24%. The company’s new AI-powered integrations and product offerings have been particularly well-received, not only by its core government clientele but also by a growing number of enterprise customers.
A major shift for Palantir has been its successful expansion beyond its heavy reliance on government contracts, making significant inroads into the commercial sector. The U.S. commercial division has performed exceptionally well, driven by AI-powered operating systems and boot camps as core strategies. In the second quarter of 2024, commercial revenues increased 33% year over year, with U.S. commercial revenues seeing a 55% boost.
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PLTR's Strong Top and Bottom-Line Prospects
The Zacks Consensus Estimate for PLTR’s third quarter 2024 earnings is pegged at 9 cents, indicating 28.6% growth from the year-ago level. Earnings in 2024 and 2025 are expected to increase 44% and 22.6% from the prior-year actuals. The company’s sales are expected to increase 26.3% year over year in the third quarter of 2024. They are expected to rise 24.2% and 21.5% year over year, respectively, in 2024 and 2025.
This positive outlook is reinforced by upward estimate revisions. In the past 60 days, six estimates for third quarter 2024 earnings have been revised upward, with no downward revisions, reflecting strong analyst confidence in the company. The Zacks Consensus Estimate for third-quarter 2024 earnings has increased 12.5% during this period. For 2024 and 2025, eight and seven estimates moved north, respectively, in the same time frame, with no south revision.
PLTR is a Buy
Given Palantir’s strong positioning in the AI and defense sectors, its consistent revenue growth from both government and commercial sectors, and its impressive earnings forecasts, the stock remains a solid buy. The company’s ability to continue winning key government contracts while simultaneously expanding its commercial footprint makes it a compelling long-term investment. As AI continues to drive growth in various industries, Palantir is well-positioned to capitalize on the rising demand for data-driven solutions.
Investors seeking exposure to AI and defense should consider buying Palantir at its current levels, with the potential for further upside in the years to come.
PLTR currently carries a Zacks Rank #2 (Buy).
Musk's new company could top a trillion?
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