Palantir Reaches Unprecedented Peak in Stock Value Today, Prompting the Question: Is Investment Worthwhile Now?
Palantir Reaches Unprecedented Peak in Stock Value Today, Prompting the Question: Is Investment Worthwhile Now?
After a while, when investors were more preoccupied with the stock's inflated evaluation and apprehensions about the pace of artificial intelligence (AI) implementation, Palantir Technologies (PLTR -3.72%) presented its third-quarter report on Tuesday morning, which helped the stock recover from its temporary slump and propel it significantly upwards. Indeed, it rose by as much as 24.1% and reached a new peak. By 1:51 p.m. ET, the stock was still up by 22.2% for the day.
As a result of this surge, some investors might question if it's already too late to invest in the stock.
Optimistic indicators
Palantir has experienced a remarkable surge since AI's advent towards the beginning of last year, with the stock increasing by approximately 689% (at the time of writing). The company's AI-driven data analysis services were already extensively used by U.S. government agencies and their allies, but the launch of Palantir's Artificial Intelligence Platform (AIP) has significantly boosted its U.S. commercial revenue.
There have been some doubts about the company's ability to maintain its growth trajectory, but the undeniable appeal of AI solutions was evident in Palantir's latest revenue figures. In the third quarter, revenue rose 30% year over year to $726 million, surpassing management's projections and expert predictions, both of which were around $701 million.
The revenue growth was primarily driven by U.S. commercial revenue, which surged by 54% and now represents 25% of total revenue. The number of U.S. commercial clients also increased by 79%. The company's potential to expand its customer base beyond its defense and intelligence sector foundation is considered key to Palantir's future success, and its progress in this area has been undeniably noticeable. Moreover, the company's profitability continued to improve with a 43% increase in earnings per share (EPS).
The fundamental query
Palantir's valuation remains a concern. Wall Street anticipates an EPS of $0.43 for the following year, meaning the stock is still trading at more than 100 times forward earnings -- it may not be suitable for all investors.
However, Palantir enjoys a unique position within the AI sphere, having honed its skills over more than two decades. Its "boot camps" offer potential customers the opportunity to collaborate directly with Palantir engineers to develop AI solutions tailored to their specific business needs.
I am confident in Palantir's prospects, which is why I've been increasing my position. For those who are hesitant about its valuation, I would suggest employing a dollar-cost averaging strategy or buying on any drops in price.
Given the impressive revenue growth and continued expansion in its U.S. commercial sector, some investors might consider increasing their financing for investing more in Palantir Technologies. Despite the stock's high valuation, using a dollar-cost averaging strategy could potentially mitigate the risk associated with its high forward earnings multiplier.