Palantir Technologies (NASDAQ:PLTR) is sitting pretty at the peak of the AI mountain, looking down on a valley of critics who just can’t seem to look beyond its valuation.
Elevate Your Investing Strategy:
- Take advantage of TipRanks Premium at 50% off! Unlock powerful investing tools, advanced data, and expert analyst insights to help you invest with confidence.
Indeed, after gaining more than 2,000% during the past three years, there are plenty of bears who believe that PLTR has soared too close to the sun. Not even the company’s impressive growth – Q2 revenues grew by 48% year-over-year, for instance – is enough to sway the pessimists.
Top investor Rick Orford understands these valuation worries, and yet he still believes that PLTR could surge even higher in the year ahead.
“Considering that enterprise AI adoption is still in the early stages, Palantir is very likely to report better figures should this adoption pace increase, and PLTR stock will likely move in the same direction,” predicts the 5-star investor, who is among the very top 1% of stock pros covered by TipRanks.
Orford points out that it wasn’t just government contracts that filled Palantir’s coffers over the past quarter, as its U.S. commercial revenues grew by 93% year-over-year as well. This is a concrete example of the company’s “successful transition” into a commercial AI business that appeals to a wide slate of clients. The fact that Palantir inked $843 million in U.S. commercial total contract value (222% year-over-year growth) is an even more impressive milestone, notes the investor.
However, Orford isn’t just focused on the company’s past performance, but rather on its massive opportunities moving forward. The investor cites a Total Addressable Market for global enterprise AI, which is predicted to expand from $24 billion in 2024 to $155 billion by 2030.
Palantir is well-positioned to capitalize on this trend, as its AIP can be tailored to support the individual needs of smaller businesses who might not have the ability to develop and train their own AI models.
“With Palantir’s established platform and expanding customer base, it’s inevitable for the company to capture a notable portion of this growth as the demand for AI enterprise increases,” posits Orford.
The investor acknowledges that PLTR’s valuation is not cheap, with a trailing 12-month Price-to-Earnings ratio in the high triple digits. Still, the company’s Rule of 40 score of 94% places it in “exceptional territory,” and Palantir has demonstrated its ability to both grow rapidly and maintain profitability.
Though “these factors resulted in a valuation that the bears can’t agree with,” Orford is content to take a more bullish stance. (To watch Rick Orford’s track record, click here)
Wall Street isn’t quite as ready to take the plunge. With 13 Holds far outweighing 4 Buys and 2 Sells, PLTR carries a consensus Hold (i.e. Neutral) rating. Its 12-month average price target of $157.65 implies a downside of ~15%. (See PLTR stock forecast)
To find good ideas for stocks trading at attractive valuations, visit TipRanks’ Best Stocks to Buy, a tool that unites all of TipRanks’ equity insights.
Disclaimer: The opinions expressed in this article are solely those of the featured investor. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.