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There’s plenty for bulls and bears to hash out over Palantir Technologies (PLTR). Bulls point to improved profitability for PLTR stock. Bears focus on decelerating revenue growth for Palantir stock. Then there’s buzz over artificial intelligence stocks to consider.
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PLTR stock hit a 52-week intraday high on Aug. 1 as AI stocks continued to rally. But PLTR stock pulled back from that 52-week high. Still, Palantir stock has advanced 134% in 2023 amid volatility in the Nasdaq.
Third quarter earnings for PLTR stock are due Nov. 2. Analysts expect 6-cent adjusted profit, up from Palantir earnings of 1 cent a year earlier. Revenue growth is expected to slow. Analysts estimate 16% sales growth to $556 million.
Aside from AI, PLTR stock could get a boost if the company wins a new contract from the United Kingdom’s National Health System. The NHS used Palantir during the coronavirus emergency. But a bigger contract worth roughly $595 million is now up for grabs. Palantir is viewed by analysts as the front-runner.
Artificial Intelligence A Growth Driver?
PLTR stock bulls point to artificial intelligence software as a growth driver. Palantir has already mined the AI opportunity with government customers for intelligence gathering, counterterrorism and military purposes.
Will generative AI spur growth in the commercial market for PLTR stock? The software maker has expanded into health care, energy and manufacturing.
Palantir announced its newest offering, the “Artificial Intelligence Platform,” early this year. As of mid-September, Palantir says the AIP now has 150 users, up 50% within the last month.
Palantir has not disclosed pricing for AI products. Analysts say Palantir needs to show progress developing new revenue streams from generative AI.
PLTR Stock: Fundamentals
The company has announced a $1 billion buyback for PLTR stock.
In addition, PLTR stock trade well below the software maker’s all-time intraday high of 45 set in late January 2021.
Meanwhile, Palantir’s governance structure gives Karp and co-founder Peter Thiel long-term control of the company through super-voting rights.
The company name is derived from the palantiri, which are crystal ball-like “seeing stones” from the “Lord of the Rings” book and film series. Palantir means “one that sees from afar.”
In addition, Palantir engineers often customize software for the needs of customers. That extends the time needed to ramp up “digital transformation” projects. So after Palantir wins a contract it may take awhile to generate revenue.
The Denver-based company offers three platforms. One is Palantir Gotham, used primarily by government agencies. There’s Palantir Metropolis for banks, financial services firms and hedge funds. And Palantir Foundry is used by corporate clients.
PLTR Stock: Government Biggest Market
Palantir gets nearly 60% of its revenue from government agencies. Decelerating revenue growth is an issue. In 2022, revenue growth slowed to 24% from 40% in 2021 and 47% in 2020.
June-quarter earnings were 5 cents per share on an adjusted basis. That was on target with analyst expectations, and up from a 1-cent loss a year earlier.
Revenue rose 13% to $533 million. That also met Wall Street targets. Revenue included investments in special-purpose acquisition companies.
Denver-based Palantir said government customer revenue climbed 15% to $302 million, in line with estimates. Commercial customer revenue rose 10% to $232 million.
Further, Palantir has been profitable using generally accepted accounting principles, or GAAP, for three straight quarters.
The company’s forecasts for third-quarter and fiscal 2023 revenue are roughly in line with expectations.
Palantir Forges Partnerships
In November 2022 Palantir acquired full ownership of a joint venture in Japan that sells the company’s software. Japanese insurance firm Sompo Holdings is the biggest customer.
Then in 2023, Palantir began consolidating revenue from the joint venture in its earnings reports. In addition, a Morgan Stanley report estimates the venture had an annual revenue run-rate of $50 million heading into 2023.
Further, Palantir recently expanded its cloud computing partnership with Microsoft (MSFT) that targets government agencies.
To speed up corporate adoption of artificial intelligence software, Palantir and IBM formed a global partnership. Under the deal, Palantir also made its Foundry software available to IBM’s cloud computing customers. The Foundry platform is a centralized data operating system that lets users manage, filter and visualize large data sets.
Meanwhile, one issue for PLTR stock is that large U.S. government contracts are coming up for renewal.
“For the U.S. Department of Defense, the main issue for Palantir is that the government simply is inclined to multi-source and there are viable data analytics alternatives,” William Blair analyst Louie DiPalma said in a recent note to clients.
Palantir Stock Technical Analysis
Palantir stock’s Relative Strength Rating stands at 98 out of a best-possible 99. Also, PLTR stock holds a Composite Rating of 98 out of a best-possible 98, according to IBD Stock Checkup.
IBD’s Composite Rating combines five separate proprietary ratings into one easy-to-use rating. The best growth stocks have a Composite Rating of 90 or better.
In addition, institutional ownership has weakened. PLTR stock has an Accumulation/Distribution Rating of B-minus. That rating analyzes price and volume changes in a stock over the past 13 weeks of trading. A+ signifies heavy institutional buying; E means heavy selling. Think of a C grade as neutral.
PLTR stock has dropped below its 50-day moving average.
Palantir stock has forged a cup base with an entry point of 20.24. As of Oct. 30, PLTR stock was not in a buy zone.
Further, check out IBD Stock Lists and other IBD content to find dozens more of the best stocks to buy or watch.
Follow Reinhardt Krause on Twitter @reinhardtk_tech for updates on 5G wireless, artificial intelligence, cybersecurity and cloud computing.
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