Recently, we suggested that Palantir Technologies (NYSE:PLTR) stock may be appropriate for investors seeking exposure to artificial intelligence software. We’re standing by this assessment today, as Palantir’s recently released financial results show vigorous growth and optimistic forward guidance.
Palantir Technologies certainly wants to help public-sector entities enhance their AI functionalities. For instance, Palantir has a contract with the Department of Defense to help multiple U.S. military entities scale up their AI/machine-learning capabilities. This contract is worth up to $250 million through 2026.
Clearly, government-sourced revenue is a key element of Palantir’s business model. As we’ll discover, Palantir Technologies is growing in this area but might not be living up to Wall Street’s ambitious expectations.
PLTR Stock Jumps Toward $20 on Positive Earnings Results
PLTR stock jumped from $15 to $17 in the early morning hours of Nov. 2 after Palantir Technologies released its third-quarter 2023 earnings report. With that, the stock moved closer to its $20 resistance level from August.
What did the market like about Palantir’s earnings data? First and foremost, the company recorded its fourth consecutive quarter of GAAP-measured profitability. Palantir Technologies posted GAAP earnings of 3 cents per share in the third quarter of 2023.
So far, so good. Palantir Technologies announced adjusted EPS of 7 cents per share, beating the analysts’ consensus estimate of 6 cents per share. Palantir’s revenue grew 17% year over year to $558 million, surpassing Wall Street’s estimate of $556 million.
Palantir Technologies CEO Alex Karp attributed the company’s impressive quarterly results to “growing demand” for Palantir’s recently introduced AI platform. Karp emphasized his company’s ability to cater to the needs of AI-hungry clients:
“Companies across industries in the United States are scrambling to deploy software platforms that will allow them to leverage the power of the latest large language models,” Karp saod. “And we have built what they need.”
An Issue to Consider With Palantir Technologies
Overall, Palantir Technologies delivered solid results and PLTR stock traders recognized this. Impressively, Palantir’s third-quarter revenue from commercial (i.e., private-sector) clients grew 23% year over year to $251 million. This result beat the Street’s consensus forecast of $234 million.
There’s an issue to consider, not a huge problem, but something for prospective investors to think about. In the third quarter, Palantir Technologies’ government revenue totaled $308 million, up 12% year over year but below the analysts’ consensus prediction of $321 million.
Karp admitted, “It’s just a lumpy business,” presumably referring to the challenge of securing public-sector contracts. Going forward, investors should watch for stronger government-revenue growth from Palantir Technologies in the coming quarters.
At least, we can say that Karp remains confident. “We’re seeing unprecedented levels of inquiries for our products, and we’re optimistic that will break in our direction sometime in the near future,” he assured.
PLTR Stock: Target $20 First, Then Higher Prices Later
The market may overlook some of Palantir Technologies’ challenges, but you shouldn’t. Informed investors can acknowledge Palantir’s strength in securing commercial revenue but also expect the company to improve in generating government revenue.
Even though Palantir Technologies didn’t bat a thousand in every area, the company still had a strong third quarter overall. Therefore, PLTR stock gets a confident “B” grade. It has a decent shot at revisiting $20 sometime this year, potentially followed by higher price points in 2024.
On the date of publication, Louis Navellier had a long position in PLTR. Louis Navellier did not have (either directly or indirectly) any other positions in the securities mentioned in this article.
The InvestorPlace Research Staff member primarily responsible for this article did not hold (either directly or indirectly) any positions in the securities mentioned in this article.
