According to my Palantir Technologies (NASDAQ:PLTR) stock analysis this could be PLTR’s year. And I’m not alone. It’s been called tje “best pure-play” AI stock and the “Messi of AI,” referring to Argentinean soccer great Lionel Messi. Both are heavy crowns to wear but that may be the case.
Much of this first wave of artificial intelligence is about who can make the best processors to power the large language models used to generate context. It’s foundational. It builds the infrastructure upon which the rest of the AI revolution will run. In the second and third waves and beyond where the actual applications and use cases emerge is where the real growth will happen.
PLTR Stock Analysis
Generative AI technology will bring a wave of benefits to the global economy. Cathie Wood predicts that AI will cause the largest productivity increase ever.
There are a few companies she is betting on to reap the largest gains from it. One of her biggest bets is Palantir. She was an early believer in the company, owning over 37 million shares at one point but sold all of them in 2022.
Wood began buying back into the data analytics firm last year and has continued amassing a growing stake in the business. Today she owns over 12 million shares across her Ark Invest exchange-traded funds for a total value of around $277 million.
Wood isn’t alone in this belief. Wedbush Securities analyst Dan Ives has been one of the biggest cheerleaders of Palantir’s potential. It was Ives who gave PLTR stock with those superlatives quoted earlier. After Palantir’s impressive fourth quarter earnings report earlier this month, he upgraded his one-year price target to $30 per share. That implies 32% upside in the stock from its current level.
Making AI Usable
Palantir is harnessing AI’s potential practically. Data analytics combine AI to transform vast data into usable form. The company’s Gotham and Foundry platforms for government and business, respectively, Palantir’s value comes from taking random and disparate data and combining it into an understandable and digestible visualization that even non-technical people can use.
Few companies are as adept at doing this as Palantir Technologies. Its recently released AI Platform enhances those abilities through the use of AI and machine learning. Its enterprise customers are flocking to the product in far greater numbers than even management predicted.
Particularly on the government side where its data analysis is literally life-and-death, Palantir’s leadership is mission critical to its customers. It should allow for an extended growth curve.
Worth the Cost?
One problem I came across in my PLTR stock analysis is there is little to no competitive moat to what Palantir offers. Other companies, through the power of AI, will replicate what Palantir’s platforms offer. It is why Palantir’s early front-runner status is so important. There could very well be high switching costs for customers considering trying another product.
Palantir’s stock is not cheap. While going for 200 times trailing earnings and 57 times estimates seems high, Palantir is newly profitable so it tends to skew such metrics higher. As it builds on its five consecutive quarters of GAAP profitability, PLTR stock will grow into the valuation.
Still, at 22 times sales and 70x free cash flow, Palantir Technologies carries a lofty valuation. Yet because of its leadership position it is worth it in this early-stage industry. It arguably has the best chance of being the best AI stock on the market today and in the future.
On the date of publication, Rich Duprey did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
