Market participants have been bullish lately about Palantir Technologies (NASDAQ:PLTR). However, check out some of the latest PLTR stock analysis out there and you’ll find many investors urging caution with this AI software stock.
Namely, a growing number of analysts and commentators are calling for those currently holding PLTR positions in their portfolios to consider taking profit, while the current strength still lasts. As you may know, Palantir has been boosted higher thanks to a strong earnings report.
Although starting to pullback a few days ago, renewed “AI mania,” on the heels of Nvidia’s (NASDAQ:NVDA) well-received quarterly earnings release, is helping to put PLTR back on an upward trajectory, towards its 52-week high (around $25.50 per share).
But even as cashing out now would enable you to lock-in unrealized gains, doing so may mean you leave considerable upside on the table. Here’s what I mean.
Palantir, Earnings, and the Stock’s Latest Big Moves
As a widely followed stock with high exposure to a key growth trend right now (the rise of generative AI), Palantir is prone to making rollercoaster-style moves. This is just exactly what has played out since Feb. 5, when the company released its latest quarterly results.
Taking a look at the number, it’s clear why the elicited a bullish response, and had a positive impact on many an investor’s PLTR stock analysis. Last quarter (ending Dec. 31, 2023), Palantir reported overall revenue growth of 20%. Commercial revenue growth was up 70% compared to the prior year’s quarter.
While revenue growth at Palantir’s government segment came in well below this figure (11%), growth last quarter increased substantially on a sequential, or quarter-over-quarter, basis. To top it all off, PLTR reported its fifth consecutive quarter of GAAP profitability. Updates to guidance called for strong revenue and profitability growth.
Again, while shares begin to dip after initially soaring 30.8% post-earnings, the latest round of excitement for AI stocks is helping to get PLTR back on track. Although this latest wave of excitement could also soon peter out, locking in gains could prove to be a mistake in hindsight.
Why This Bull Run Could be in the Early Stages
With Palantir stock soaring higher within a short span of time, and with shares now sporting a rich forward valuation (69.7 times earnings), I can understand the “take profit” warnings. Interestingly enough, even within these warnings, are signs of major factors that could enable the stock to sustain its valuation, and keep on climbing.
What do I mean? Take, for example, one of the sell-side analysts arguing for reduced enthusiasm in their latest PLTR stock analysis: HSBC’s Stephen Bersey. Following the earnings release, Bersey downgraded Palantir from “Buy” to “Hold,” while maintaining his price target ($22 per share).
But while the analyst cited valuation as the key reason for his downgrade, in the same research, Bersey argued that not only could Palantir’s commercial unit keep growing at a rapid pace; the government unit could experience further growth re-acceleration.
In turn, per Bersey’s forecasts, could result in annualized earnings growth of 24% per year through 2028. Sure, forecasting results that far out into the future is more an art than a science. Despite an already-rich valuation, growth like this could still keep shares moving steadily higher. Better yet, even this aggressive growth forecast could prove conservative.
PLTR Stock Analysis: Still a Buy Post-Surge
As the artificial intelligence secular growth trend continues, the sky may just well be the limit for Palantir and its ability to keep on growing its revenue at a breakneck speed.
However, that’s not all. Even as growth invariably slows down once the company matures, this will also likely enable Palantir to “cash the check,” by taking its foot off the growth petal, maximizing profitability.
The resultant earnings growth from this could mean a far more material increase to the company’s bottom-line over time than even the aforementioned long-term earnings forecast suggests.
With this in mind, here’s my latest PLTR stock analysis: as cashing out now could mean you leave upside on the table, feel free to maintain a position. If you’ve yet to buy, shares remain a strong opportunity, even after the latest surge.
PLTR stock earns an A rating in Portfolio Grader.
On the date of publication, Louis Navellier had a long position in PLTR and NVDA. 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.
