Shares of AI darling Palantir (NASDAQ:PLTR) went parabolic following the release of some exceptional quarterly earnings results. Now up more than 260% year to date, questions linger as to whether the AI-first big data analytics has what it takes to keep delivering profoundly strong quarters to support its remarkable rally.
Indeed, a 44% pop in just a few weeks is an explosive gain, to say the least. But given where the puck is at in the AI hockey game, I’d argue that numerous scenarios could play out that lead PLTR stock to even higher levels in the new year.
Indeed, Wedbush Securities analyst Dan Ives was absolutely right when he referred to Palantir as the “Messi of AI.” Even at today’s seemingly elevated valuation multiples, I’m not sure your average investor views the name as performing at such a profoundly high level. Messi isn’t just a great soccer player; he’s a legend of the sport, right up there with Wayne Gretzky and Alexander Ovechkin.
Only time will tell if Palantir ends up living up to Ives’ Lionel Messi comparisons. Regardless, I wouldn’t want to stand in the way of a firm amid its latest melt-up moment.
Key Points About This Article
- Palantir is melting up as investors pound the table on AI growth.
- The earnings bar is high, perhaps too high for the company Dan Ives calls “the Messi of AI.” However, I could be wrong.
- If you’re looking for some stocks with huge potential, make sure to grab a free copy of our brand-new “The Next NVIDIA” report. It features a software stock we’re confident has 10X potential.
Palantir stock’s moment to shine
First, it was the AI semiconductor stocks, then the data center plays and the nuclear energy names that stood to power them. Now, it seems like the AI hype and enthusiasm are bringing unprecedented euphoria to the often misunderstood world of AI software.
It can be tricky to tell the difference between the firms with explosive AI-induced earnings growth opportunities and the ones that may have little to nothing to show for their efforts. Regarding Palantir, the AI growth (and investor hype) has arrived in a big-time way, and it’s tough to tell if we’re on the cusp of an even more explosive acceleration or if a demand cooldown is in the cards at some point.
In the latest quarter, the AI Platform (AIP) gained some serious ground. CEO Alex Karp went as far as to say it “transformed our business.”
As Palantir powers ahead on its commercial growth opportunity, I think the transformative AIP driver has more growth left in the tank. It may be hard to pinpoint where AIP takes Palantir next, but I would not take Karp’s words lightly as its hot growth driver powers ahead.
Recently, Palantir recently inked a deal with Amazon (NASDAQ:AMZN) and Claude parent Anthropic (a leading AI firm in which Amazon has also invested) for work on AI for the defense department. Palantir is no stranger to landing major government contracts. As it joins forces with an AI behemoth to work on such a lucrative opportunity, it’s tough not to view PLTR as one of the more impactful players in AI software.
What about valuation and the road ahead?
Palantir stock’s valuation metrics are sure to make value investors uneasy. If you want AI-driven growth, you’re just going to need to pay for it. Today, PLTR stock goes for over 147 times forward price-to-earnings (P/E) and over 54 times price-to-sales (P/S). Of course, Palantir stock has always been incredibly expensive, but some Wall Street analysts think the valuation has gotten a tad out of control. With such high multiples comes equally high expectations of growth.
Just last week, Jefferies downgraded PLTR stock from hold to underperform, primarily due to the hefty valuation it viewed as “unsustainable.” While commercial represents a profound growth driver that many can get behind, I’d have to agree with Jefferies in that PLTR is a tad too pricy here after its parabolic move. If you’re keen on the name, perhaps waiting for a pullback before buying could prove smart.
Even if inflation and stagflation rock the economy and the stock market at some point in the future, don’t expect AI to slow down. AI doesn’t seem to care what state the economy is in. And while firms may be inclined to spend less on AI when times are bad, I’d argue that such investments will eventually act as tools to navigate economic downturns. In the case of Palantir, I think it may have an AI platform that’s too costly not to incorporate.
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