Exploring well into the third quarter of 2024, the artificial intelligence (AI) industry remains a potent force shaping Wall Street’s landscape. Tech giants and upstarts are engaged in a fierce battle for supremacy in this ever-evolving arena. The global AI market is set to skyrocket to $184 billion in 2024, poised to inject roughly $15.7 trillion into the global economy by 2030. From a mere 17.1% in 2017, AI adoption has now soared past 34.8% and is anticipated to engulf over 1.3 million businesses by 2040, heralding a new era of enterprise technology.
Palantir Technologies (PLTR), an eminent figure in enterprise software and security for more than two decades, recently made waves with its collaboration with tech behemoth Microsoft (MSFT). This alliance was unveiled hot on the heels of Palantir’s robust quarterly earnings report earlier in August. The reverberations of this partnership have sent waves of optimism through the investor community, propelling Palantir’s stock price by over 6% in just a single week.
The timing of this move cannot be overstated, given the escalating emphasis on AI technologies across public and private sectors. Noted analysts, such as fervent Palantir advocate Dan Ives of Wedbush, regard this collaboration as a potential game-changer for Palantir, particularly in the federal domain, where its Artificial Intelligence Platform (AIP) could garner widespread acceptance.
The Phenomenal Surge of Palantir’s Stock Price in 2024
Following a protracted spell of lackluster performance, Palantir Technologies (PLTR) has deftly leveraged the AI frenzy gripping the stock market. The stock has notched up robust gains, boasting an impressive 81.8% surge year-to-date and a remarkable 103.1% upswing over the trailing 52 weeks.
Currently sporting a market capitalization of $69.01 billion and an enterprise value of $68.20 billion, Palantir has firmly entrenched itself among the crème de la crème of data analytics and AI software purveyors. However, this dazzling valuation comes with towering expectations, evident in the company’s valuation metrics.
Palantir’s Ascendancy Post Q2 Earnings
Palantir’s financial performance has mirrored its soaring stock price of late. In its Q2 2024 earnings disclosure, the company announced a stellar 27% year-over-year surge in revenue, reaching a formidable $678 million. Notably, Palantir notched up a record-high GAAP earnings per share of $0.06, marking its seventh consecutive quarter of GAAP profitability. This unwavering profitability represents a significant milestone for a firm operating in the AI space, where growth often takes precedence over immediate profits.
The U.S. commercial revenue, excluding strategic commercial contracts, skyrocketed to $159 million, marking a commendable 55% annual increase. This diversification into the commercial realm bodes well for Palantir, hinting at a broadening revenue stream beyond its core government contracts. Moreover, the company surpassed analyst projections, with earnings per share of $0.09 outstripping the anticipated $0.08.
Buoyed by a robust second quarter, Palantir upped its full-year guidance, envisaging revenue in the range of $2.74 billion to $2.75 billion, with adjusted operating income expected to hit $970 million at the midpoint. These figures underscore the company’s conviction in sustaining its growth trajectory.
Forging Strategic Alliances and AI Expansion
Leveraging its momentum from a 10% post-earnings rally, Palantir soared an additional 11% following its collaboration announcement with Microsoft, aimed at enhancing AI and analytics services for U.S. government agencies, with a particular focus on classified networks pivotal for national security.
This partnership entails the rollout of Palantir’s product suite — including Foundry, Gotham, Apollo, and AIP — on Microsoft’s Azure Government and classified cloud environments. Furthermore, they are integrating Microsoft’s large language models (LLMs) into Palantir’s AI platforms via Azure OpenAI Service, setting the stage for AI-powered operational tasks in defense and intelligence sectors. Eager investors pushed PLTR stock above $30 per share last week for the first time since February 2021 on the back of this news.
Unveiling Palantir Technologies: Riding the Wave of Strategic Collaborations
The Power of Collaborations
Palantir Technologies is strategically engaging with government agencies through innovative initiatives such as boot camps to drive the adoption of their cutting-edge technology. These endeavors have played a crucial role in attracting commercial clients to Palantir’s Artificial Intelligence for Physicists (AIP) since its debut last year. By working closely with users to craft tailored solutions for real-world challenges, Palantir engineers empower agencies to independently develop AI solutions.
In another bold move, Palantir has joined forces with Surf Air Mobility to integrate its Foundry operating system. This strategic collaboration aims to optimize Surf Air’s operations and accelerate the embrace of sustainable aviation practices. Palantir’s foray into the aviation sector signifies a broadening of its market influence while actively contributing to sustainability endeavors.
Insights from Analysts
Dan Ives, an analyst at Wedbush, holds an optimistic outlook on Palantir, particularly following its recent partnership with Microsoft. Viewing this collaboration as a catalyst for Palantir’s AIP platform, Ives envisions an expanded footprint in the federal domain. He rates the stock as “outperform” with an ambitious price target of $38, marking a potential 21.7% upside from the close on Thursday.
Despite these bullish forecasts, the consensus among analysts regarding Palantir remains mixed. The average target price stands at $23.73, signaling a notable 24% downside from current levels. Of the 15 analysts covering the stock, recommendations vary significantly, with 3 suggesting a “strong buy,” 1 a “moderate buy,” 4 a “hold,” 1 a “moderate sell,” and 6 a “strong sell.”
Looking Ahead
So, the burning question: Is investing in Palantir stock a wise move given its collaboration with Microsoft? The answer, with caution, leans towards yes. The Microsoft deal represents a significant win, potentially propelling Palantir’s presence in the federal AI landscape. Complemented by robust financial performance and expanding commercial partnerships, Palantir seems primed for further expansion.
Nevertheless, having witnessed a substantial price surge, and amidst a cacophony of conflicting analyst opinions, approaching Palantir stock requires a nuanced perspective. If you believe in the power of AI and are prepared for some market rollercoaster, Palantir might just be a compelling option to explore.
