Data analytics company Palantir Technologies (NYSE:PLTR) is enjoying a strong tailwind from artificial intelligence, one that is likely to continue in coming quarters. While Palantir stock continues to be a strong performer, its share price has wobbled since the company’s most recent earnings report, falling 7% in the past month.
Palantir executives’ guidance has caused a dip in share price. There are concerns about the stock’s high valuation, trading at 165 times future earnings estimates. However, the company’s profitability, clean balance sheet, and growing customer base are reasons to bet on PLTR stock for the long term.
Oracle Deal
While Palantir continues to get most of its revenue from contracts it has with governments around the world, the company is taking steps to grow its private sector business.
Case in point, Palantir has announced a strategic partnership with Oracle Corp. (NYSE:ORCL). The arrangement will see the two companies join forces to offer cloud, data and AI solutions to businesses.
Specifically, Palantir’s Foundry software as a service platform will operate on Oracle Cloud Infrastructure. The foundry offering helps users improve decision making through data visualization and model building.
Customers can now access Palantir’s Foundry software, as well as Palantir’s AI platforms, through Oracle’s distributed cloud services to help them make better decisions.
This is an especially big win for Palantir. The arrangement with Oracle is a big reason Palantir stock is up nearly 30% on the year, bringing its 12-month gain to 54%. The company’s commercial customer count rose 55% year over year in 2023 to a total 221 customers.
Growth From AI
When releasing their first-quarter financial results, Palantir’s management team strongly emphasized the growth the company is seeing from AI-related business opportunities.
The company builds AI software for governments and private sector companies and says demand is surging. Palantir CEO Alex Karp has characterized the current demand for AI products as “unrelenting.”
The company’s Q1 print was solid, with Palantir reporting EPS of 8 cents, matching Wall Street estimates. The company has now posted a profit for six consecutive quarters. Revenue amounted to $634 million versus estimates of $625 million. Overall sales were up 21% from a year earlier.
Unfortunately, Palantir issued guidance that left investors unimpressed. The company expects current second-quarter revenue of $649 million versus $653 million, which was the consensus expectation among analysts.
Investors should keep in mind that Palantir tends to issue conservative guidance and, more often than not, ends up beating it.
Buy Palantir Stock
Palantir’s valuation is certainly expensive. However, at $21 a share, the stock is affordable for most investors to buy. Palantir’s high valuation is driven by its uniqueness as a profitable and fast-growing technology company with AI opportunities.
Among tech stocks, there really isn’t another one quite like Palantir. The diverse mix of government and commercial clients also makes the company a unique investment opportunity. For all of these reasons, Palantir stock is a buy.
On the date of publication, Joel Baglole did not have (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.
