TV analyst Jim Cramer got behind Palantir (NASDAQ:PLTR) stock overnight, giving shares in the government contractor a small boost.
Palantir stock opened this morning at $16.40 per share, bringing the company’s market capitalization to about $35 billion. Palantir reported revenue of $1.9 billion last year. The shares are up 161% in 2023, with nearly all that gain coming in the last two months from artificial intelligence (AI) hype.
Cramer called the stock a “buy” on his “lightning round” segment.
War Games
Palantir isn’t selling the kind of generative AI that draws pictures or tells stories. It’s selling a proprietary database product that can analyze military data. In the words of co-founder Peter Thiel, it “allows you to win.”
Palantir’s success story is Ukraine. The company’s software is helping drive that country’s offensive against Russia. It is allowing Ukraine to efficiently retake territory against entrenched Russian defenses with minimal casualties.
Its work there has brought a renewal of U.S. military contracts at higher prices than before. While software prices usually decline as usage accelerates, Palantir’s prices are rising.
This is not yet showing up in analyst estimates. The company is expected to earn just 5 cents/share for the second quarter, 21 cents for the whole year. Revenue growth should accelerate, but only to 18% in 2024.
Faster growth will demand commercial success. Palantir launched its Foundry for Manufacturing product on Amazon’s (NASDAQ:AMZN) AWS cloud this month. The software claims to let companies plug their data into the system and get quick recommendations for improving productivity.
PLTR Stock: The Bottom Line
There are few places where investors hungry for AI profits can go right now. Palantir is delivering profits on what it calls an AI platform, so it’s a natural winner.
But as more companies win at AI, expect Palantir to trade more like a defense contractor. Conflict assures that it will be a good holding. Just maybe not at 18 times revenue.
As of this writing, Dana Blankenhorn held a LONG position in AMZN. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
