Data analytics specialist Palantir Technologies (NASDAQ:PLTR) reported its fifth consecutive profitable quarter on a GAAP basis and its first profitable year. Even before undertaking this PLTR stock forecast, we expected that was going to happen. Still, the news after the market closed sent PLTR stock soaring almost 20% higher.
It shows the potent combination of Big Data and artificial intelligence is too great a force to stop. They are naturally made for one another and why Palantir was called the “best pure-play” in AI. But what does the future hold? A reasonable PLTR stock forecast would suggest this is just the beginning. It raises the question of how high is up? Because that’s where Palantir is heading.
A PLTR Stock Forecast
Fourth quarter revenue for the data analytics specialist rose 20% year over year as the U.S. enterprise segment shot 70% higher to $131 million. Overall segment revenue jumped 32% to $284 million. It reported more than $1 billion in commercial revenue for the full year. Palantir now has 221 U.S. customers, a 55% increase from last year and 22% more than in Q3.
Tremendous demand for its Artificial Intelligence Platform is driving sales higher. Last October, Palantir set a one-year goal of 500 “boot camps” for AIP.
In chief revenue officer Ryan Taylor’s own words, “We have already blown that goal out of the water.” Palantir has completed 560 boot camps to date across 465 companies.
The company sees no end in sight either. Pointing to combining AIP with its existing Foundry platform for enterprise, Taylor says there is exponential growth potential so that the “total addressable market expands considerably.”
The second pillar of Palantir’s growth progress is the government sector where it got its start. That segment accounts for more than half of the analytics firm’s revenue but it increased just 11%, less than half the 23% growth the segment enjoyed a year ago.
Palantir says it is not a lack of demand causing muted results but rather the way the government operates.
“Some of this is due to the continuing resolution and timing of large potential contract awards. But it’s also a function of the (Defense) Department’s pace of scaling their AI and software efforts.”
The lumpiness of government revenue is very much the reason Palantir began pursuing commercial customers.
A Plethora of Profits
The big news, of course, is not so much the growth in revenue but that Palantir is generating it profitably and consistently now. Net income of $93 million in Q4 was an increase of 15% from last year. For the full year, it generated a record of almost $210 million in GAAP earnings.
On an adjusted basis to account for stock-based compensation and other items, Palantir reported $633 million in full-year income from operations. It forecasts it will produce between $834 million and $850 million in adjusted operating profits, a 33% increase at the midpoint.
Where PLTR goes from here?
The sky appears to be the limit. Because U.S. companies are often early adopters of technology like Palantir’s AIP, it suggests there is still massive international growth yet to come. That bodes well for 2024 and beyond.
Yet it’s inescapable PLTR stock is richly valued. Palantir carried a premium price tag before earnings and now is even more so at sky-high valuations. It trades at 44 times next year’s earnings, 16 times sales, and 52x free cash flow.
I’ve said previously Palantir can grow into its valuation but it keeps pushing those boundaries ever higher. At under $20 a share, I’d be hard-pressed not to say the stock is still a buy. Because of the premium price being charged, I might not dive as deeply into the pool right now. Instead, be more aggressive if the stock pulls back at all.
There are strong tailwinds behind Palantir Technologies as we’ve only begun to scratch the surface of AI’s potential. The analytics firm’s customers seem wowed by what the platform can do for their business. That bodes well for continued demand and growth.
It’s why I say PLTR stock is worth adding to your portfolio, even at these lofty prices. That’s because 10 years down the road you will look back and the dollar or so in savings you made by waiting to buy in will be dwarfed by its valuation at the time.
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.
