Palantir Shares Rose 368% And AI Could Propel Them Higher

WASHINGTON, DC – MAY 07: (L-R) Co-founder and CEO of Palantir Technologies, Alex Karp, and Admiral … [+] Tony Radakin attend the Palantir booth during the AI Expo For National Competitiveness at Walter E. Washington Convention Center on May 07, 2024 in Washington, DC. (Photo by Tasos Katopodis/Getty Images for Palantir)

Getty Images for Palantir

Shares of Denver-based software provider Palantir rose nearly 23% on February 4 following fourth quarter results featuring faster-than-expected growth and an optimistic forecast for the current quarter and the year, according to CNBC.

Having risen 368% in the last year and sporting a price-earnings ratio of 516, according to the Wall Street Journal, do shares of Palantir have more upside? If Wall Street analysts are right, the stock is about 26% too high.

However, what matters most for the future of Palantir’s stock is whether the company can keep beating expectations and raising guidance.

That could happen – especially if Palantir – which counts Peter Thiel among the company’s early investors – can harness artificial intelligence to make its defense and commercial customers better off.

Palantir Fourth Quarter Performance And Prospects

Palantir stock rose to a record after reporting “stronger-than-expected fourth-quarter results and guidance driven by AI,” noted CNBC. The company’s commercial revenue increased 64% in the quarter while U.S. government sales rose 45%.

Momentum at Palantir is “unlike anything that has come before,” CEO Alex Karp said, noted CNBC.

Here are the key numbers:

  • Fourth-quarter 2024 revenue: $828 million – up 36% and $52 million above the analyst consensus, according to London Stock Exchange Group.
  • Q4 2024 adjusted earnings per share: 14 cents – three cents more than analysts expected, LSEG noted.
  • Q1 2025 revenue estimate: $860 million – the range midpoint – which exceeds analysts’ estimate by $61 million, LSEG reported.
  • 2025 revenue estimate: $3.75 billion – the range midpoint – $230 million more than the LSEG estimate.

“We are at the way beginning of our trajectory, we are at the way beginning of a revolution, and we plan to be a cornerstone — if not the cornerstone company — and driving this revolution in the U.S. over the next three to five years,” Karp said during the company’s earnings call, noted CNBC.

Palantir’s Sources Of Future Growth

Palantir has been known for national security work and has recently benefited from commercial and government adoption of the company’s AI platform.

Palantir expects federal budget cuts by the Elon Musk-run Department of Government Efficiency to add to the company’s growth. “Palantir’s real competition is a lack of accountability in government,” Palantir Chief Technology Officer Shyam Sankar told the company’s February 3 investor conference call, according to Bloomberg.

“DOGE is going to bring meritocracy and transparency to government,” he added.

Palantir’s technology is widely used by governments. The company’s customers include “all U.S. military branches and American allies in Ukraine and Israel,” noted Bloomberg.

Palantir’s artificial intelligence platform helps clients “pull together disparate collections of data into a single model that they then can build, train and deploy in their day-to-day processes,” reported TheStreet.

AIP is increasingly in demand. To wit, Palantir recently expanded a deal with the U.S. Army to as much as $619 million through 2028 while extending the company’s AI work with the U.S. Special Operations Command, Bloomberg noted.

Palantir’s ontology service — a framework that helps represent and connect entities, data, and processes for its commercial clients — is also in demand.

Palantir envisions replacing traditional defense firms with software-first companies. To that end, the company has enhanced an existing partnership with weapons-maker Anduril Industries.

Palantir also formed a new partnership with AI startup Anthropic “to bring its large language models to U.S. intelligence and defense operations,” Bloomberg reported.

Palantir sees tremendous growth ahead due to U.S. demand for AIP. “America continues to rapidly embrace the AI revolution, and we saw this unrelenting demand drive impressive outperformance in our U.S. business,” Palantir CFO Dave Glazer told investors on the conference call.

“Our U.S. commercial business is seeing unprecedented demand, with AIP driving both new customer conversions and existing-customer expansions in the U.S.,” Glazer added.

Where Wall Street Sees Palantir Going Next

While the Wall Street consensus sees Palantir as overvalued, several analysts are revising upwards their estimates following the company’s latest report. More specifically, 17 Wall Street analysts set an average price target of $75.29 – making the stock about 26% over-valued, noted TipRanks.

Several Wall Street firms lifted their price targets. Palantir is an AI “value adder,” noted Bank of America’s Mariana Perez Mora.

Morgan Stanley upgraded the stock to equal weight from underweight. “Given the strength of the outlook, we acknowledge that we were wrong about our core fundamental catalyst of slowing growth below the 30% level due to the tougher compares in 2025,” wrote Morgan Stanley analyst Sanjit Singh. “This leaves us with valuation as the primary remaining concern.”

D.A. Davidson lifted its price target 82% to $105 a share. “The winning continues” said D.A. Davidson analyst Gil Luria. “Palantir reported an outstanding quarter with revenue growth accelerating further due to relentless U.S. demand for AI solutions. Palantir remains well positioned to benefit from helping customers effectively utilize LLMs through its ontology,” he added.

Not all analysts see Palantir’s stock price rising. Indeed, Raymond James expressed enthusiasm about Palantir’s performance and concluded the company’s stock price fully incorporates its future growth.

Palantir’s Q1 revenue forecast reflects “strong exit velocity” from 2024 and “persistent AIP momentum and demand across virtually all markets,” noted Raymond James analyst Brian Gesuale who reiterated his ‘market perform’ rating on the stock. “We are taking our model above the guide given encouraging checks, the potential to benefit from Doge and recent momentum,” he added.

If Palantir exceeds its ambitious growth forecast for Q1 and raises guidance, the stock may pop and Gesuale’s conservatism will likely disappoint those who follow his advice.

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