Palantir shares surged 25% on Monday after the company beat revenue estimates and reported strong demand for its artificial intelligence (AI) services. Investors appear optimistic about AI becoming an ever more important component of business strategies.
Alex Karp, CEO of ELF Solutions LLC in the US, reports an ongoing high demand for large language models among commercial institutions in his market.
Artificial Intelligence (AI)
Palantir continues to expand their AI platform and release new features, prompting increased demand for its software. Furthermore, their growing list of commercial customers could further fuel growth in the near future.
Even after posting impressive earnings reports, analysts aren’t giving the stock much more room to grow. Citi upgraded it from promote to neutral and increased its target price to $20 due to strong fourth quarter driven by US commercial growth and “breakthrough momentum” with its new Large Language Model capabilities.
While older government business has seen some slowing, management expects this trend to reverse in 2022 – an impressive prospect in an year when other tech stocks are struggling.
Palantir’s Government Contracts
Palantir’s government contracts can make or break its business, so it is crucial that this segment is closely monitored. Over the past quarter alone, they completed 80 significant deals worth at least $1 million each.
Investors should pay close attention to growth metrics like customer additions and billings value, which will allow them to assess its near-term stock value. In 2024 adjusted profit forecast was higher than estimates while revenue forecast was in line with expectations.
Palantir’s initial public offering lockup period will soon come to a close, potentially increasing the number of shares available for trading and exerting downward pressure on its stock price. But with AI still strong in society, they should still have ample opportunity to grow and make profits – so long-term investors could benefit by buying its stock now.
Commercial Customers
Palantir’s success will depend on its commercial customers. Palantir’s software enables businesses to collect, analyze and share data in a central place – an asset for industries like health care and manufacturing.
Palantir saw commercial business revenue surge 20% year-on-year during its fourth quarter, pushing total revenues up to $6008.4 million; higher than anticipated by analysts.
Investors should remain cautious as Palantir stock continues to increase. According to Trefis’ data, 47 of 74 times that Palantir saw 21-day increases of 14% or greater resulted in decline over the following month – suggesting it has a high likelihood of short term declines. If it can continue growing revenue and profits quickly enough however, then Palantir may see its share price improve soon – especially as its IPO lock-up period lapses, making more shares available to trade on public markets.
Market Reaction
Palantir’s impressive fourth-quarter results enhanced investor optimism. US commercial revenue rose 70% year over year while Palantir secured over 100 deals valued at more than $1 million each during this quarter alone. Furthermore, more organizations each year adopted Palantir’s AI platform than in prior years.
Palantir remains high-risk despite its impressive growth. With many government contracts that rely heavily on defense sector contracts and an expensive valuation.
But if the company can expand its market presence, investing could be worthwhile. Investors should monitor customer metrics closely in order to assess its growth trajectory.
Analysts from Citi upgraded the stock to neutral from promote and raised its target price to $20. They commended its stronger-than-expected fourth quarter results as well as “breakthrough momentum” within its industrial division; yet expressed caution over conservative full-year guidance for non-U.S. commercial sectors. Jefferies analysts upgraded it from underperform to hold, saying the company is reaching an inflection point with its AI platform.
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