Palantir’s Stock is Rising: Is It Too Late to Invest in AI?
9 minutes for reading
Investments in AI are primarily associated with acquiring securities of Microsoft Corporation (NASDAQ: MSFT), a collaborator with OpenAI OpCo LLC and NVIDIA Corporation (NASDAQ: NVDA). It is worth noting that the former has developed the popular ChatGPT, while the latter is a major manufacturer of microchips for AI.
However, other market players are actively introducing AI-based products into daily life and business processes. One such player is Palantir Technologies Inc. (NASDAQ: PLTR), which develops and sells software for data analysis.
In Q3 2023, Palantir reported a net profit of nearly 74 million USD, marking its fourth consecutive profitable quarter. The company’s management foresees ongoing improvements in key financial indicators.
On 27 November 2023, we analysed Palantir Technologies Inc.’s stock. In this article, we explore the company's main products, examine its quarterly reports, and share expert forecasts for its stock dynamics for 2023-2024.
Palantir Technologies Inc. was founded in the US in 2003. The company develops software for analysing and visualising big data, primarily serving government organisations dealing with crucial global issues such as counterterrorism, financial crime, and epidemics.
According to the corporation's website, on 26 October 2023, Palantir secured the top spot in the Dresner Advisory Services rating of AI, science, and machine learning technology suppliers.
On 2 November, Palantir Technologies Inc. reported its performance in Q3 2023. Revenue from July to September rose by 16.80% compared to the same period in 2022, reaching 558.16 million USD. Net profit amounted to 73.44 million USD or 0.03 USD per share, while a year before, the company had recorded a loss of 123.88 million USD or 0.06 USD per share. The commercial customer base in the US grew by 37% to 181 clients. On the same day, the stock closed the trading session with a rise of 20.44% to 17.97 USD.
The fact that the company has recorded a net profit for the fourth quarter in a row gives it the right to qualify for inclusion in the S&P 500 index. It can be assumed that this potential development could significantly increase investor interest in the issuer’s securities.
Palantir Technologies Inc. expects that by Q4 2023, revenue will have reached 599-603 million USD, implying a rise of over 17% compared to the same period of 2022. The forecast for the full year is revenue levels of 2.216-2.222 billion USD, which also means growth of over 17%.
The debt ratio of the issuer is 0.07, indicating minimal debts, while the gross margin amounts to 79%. The P/E ratio of 300 suggests that the company's stock is overvalued, although this is the case for all companies transitioning from negative to positive earnings.
For example, Tesla Inc. (NASDAQ: TSLA) reported net income for the first time in Q2 2020, and its P/E ratio for Q4 2020 peaked at 1,120. However, this did not prevent the carmaker’s shares from rising further, and at the time of writing, Tesla's P/E was 75.82.
Palantir Technologies Inc. collaborates with the US government in defense and intelligence activities. According to an official press release, on 10 October, the corporation signed a new three-year contract worth 250 million USD to provide additional support to the armed forces, intelligence, and special services.
- Palantir Gotham is a platform for integration, analysis and data exchange between various sources and users. It allows analysts to collaborate and discover new hidden patterns and correlations in data.
- Palantir Foundry is a platform for creating and managing AI solutions across diverse industries. It is designed for organisations to develop, test, and deploy machine learning models, and monitor their work.
- Palantir Artificial Intelligence Platform (AIP) is a platform that enables the use of large language models and other AI technologies on organisations’ proprietary networks, thereby maintaining complete control over AI access. AIP provides tools for creating, managing, and evaluating models, and creating artificial agents capable of understanding, recommending, and initiating business processes and actions. The platform ensures the security and transparency of AI operations, allowing the definition of rules and boundaries for its activities and involving humans in the decision-making processes.
According to Ryan Taylor, director of business processes at Palantir Technologies Inc., one way to expand the corporation’s client base is to train users to interact effectively with AI within its products. Taylor notes that clients are delighted with both the training and technology. Training is planned in November for 140 organisations, which is more than in the whole year 2022.
According to the New York Times, on 21 November 2023, the UK’s National Health Service (NHS) signed a seven-year contract with Palantir Technologies Inc. worth 330 million GBP. Under the agreement, the corporation will supply the government organisation with a Federated Data Platform designed to integrate data across the NHS into one central repository.
Palantir Technologies Inc. was selected following its successful collaboration with the NHS during the COVID-19 pandemic. The company supplied software for analysing and visualising large volumes of data on morbidity, mortality, hospitalisation, and vaccination.
However, the new contract with Palantir Technologies Inc. has drawn criticism from European human rights organisations concerned about how the corporation will use and store the important health information of millions of British citizens. In 2021, the NHS and Palantir Technologies Inc. already faced a lawsuit, leading to the termination of the contract by the British side. Hence, there is a basis to expect a repeat of the situation under current conditions.
According to Barchart data as of 27 November 2023, analysts have varying opinions on the value of Palantir Technologies Inc.’s stock: two experts rate the shares as Strong Buy, one as Moderate Buy, five as Hold, one as Sell, and five as Strong Sell. The maximum price target for stock growth is 25 USD, while the minimum selling price is 5 USD, and the average price based on the forecast of 14 experts stands at 14.65 USD.
The Economy Forecast Agency analysts predict that Palantir Technologies Inc.’s stock will end 2023 at 19.06 USD and reach 30 USD by the end of 2024.
Experts at investment bank Jefferies believe that the Artificial Intelligence Platform could lead to Palantir Technologies Inc.’s durable growth and mid- and long-term profitability.
According to Bloomberg, Morgan Stanley (NYSE: MS) holds a more pessimistic outlook on Palantir Technologies Inc.’s shares. The bank’s experts believe that the stock’s current valuation reflects AI euphoria: despite the company having popular products, it lacks a clear monetization plan. Therefore, Morgan Stanley’s analysts downgraded the tech corporation’s stock from Equal Weight to Underweight.
As at 30 September 2020, when Palantir Technologies Inc. conducted its IPO, its capitalisation was 21.75 billion USD. By 25 January 2021, it reached its peak value of 97.91 billion USD, aligning with a surge in stock prices from 10 to 45 USD per unit.
On 27 November 2023, the corporation’s market capitalisation stood at 4.78 billion USD, equivalent to a stock value of 19.20 USD per unit. It makes sense to assume that investors may target the resistance level of 45 USD, considering the company's shares reached a historical peak of 45 USD.
When observing the trading history of Palantir Technologies Inc.’s stock, one can note that the quotes move within ranges. From 22 February to 29 November 2021, the stock traded within a range of 20.00-27.50 USD. However, the price subsequently broke the lower boundary and dropped to a low of 6.50 USD.
From 9 May 2022 to 15 May 2023, the shares traded within a range of 6.50-10.50 USD. After breaking the upper boundary, the quotes reached a high of 20.00 USD and formed a range between 13.50 and 20.00 USD.
On 17 November 2023, the stock failed to break the resistance level at 20 USD. The quotes might fall to the lower range boundary of 13.50 USD in this situation. Demand for the shares will likely increase again at this level, with the bulls potentially trying to break the upper range boundary at 20.00 USD.
Given the trading history of Palantir Technologies Inc.’s stock, it can be presumed that following a breakout of the upper range boundary, the price might move to a high of 27.50 USD. Subsequently, a new trading range could start to form. Based on this information, the corporation’s stock value could gradually reach an all-time high of 45 USD.
Palantir Technologies Inc., which develops software for big data analysis and collaborates with US government agencies, reported growth in revenue and net profit in Q3 2023. It is worth noting that the corporation has achieved profitability for the fourth consecutive quarter.
According to technical analysis, following a correction to 13.50 USD, the shares might resume growth and surpass the resistance level of 20.00 USD. The company’s management forecasts a further increase in revenue and profit, which could positively affect the stock value. However, experts do not take a definitive stance on the prospects for the stock of this tech sector representative.
* – Past performance is not a reliable indicator of future results or future performance.
The material presented and the information contained herein is for information purposes only and in no way should be considered as the provision of investment advice for the purposes of Investment Firms Law 87(I)/2017 of the Republic of Cyprus or any other form of personal advice or recommendation, which relates to certain types of transactions with certain types of financial instruments.
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