By Shares of Palantir Technologies Inc. have seen significant growth this year, riding the wave of Wall Street’s enthusiasm for generative artificial intelligence. However, analysts believe that investors will need to exercise patience in order to fully realize the potential of this opportunity in the company’s financial performance.
While the latest earnings report from Palantir essentially met expectations, the overall growth of the company did slow down.
Palantir announces $1 billion buyback program
Mizuho analyst Matthew Broome suggests that the company’s focus should be on developing and expanding its Artificial Intelligence Platform (AIP) among new and existing accounts, rather than prioritizing immediate monetization. While acknowledging the significance of this long-term opportunity, Broome also recognizes the risk of potential distraction as the company’s legacy government and commercial businesses are already facing challenges in execution and experiencing a notable deceleration. He advises that investors exercise patience in order to witness the financial benefits of AIP in Palantir’s results.
Broome maintains a neutral rating on the stock and has raised his price target to $16 from $14.
In premarket trading on Tuesday, Palantir shares dropped by 3%.
Jefferies analyst Brent Thill finds the second quarter performance to be underwhelming, particularly due to the lack of substantial upside. He also notes that Palantir shares are currently valued at 15 times expected 2024 revenue, making it one of the most highly valued assets in the software industry. Thill believes that the commercial business will play a crucial role in driving future growth for Palantir and emphasizes the importance of consistent execution. In the first quarter, revenue growth for the commercial business slowed to 10% on a year-over-year basis from 15%.
Overall, while Palantir continues to ride the wave of AI enthusiasm, analysts caution that the financial benefits of this technology may take time to materialize fully. Investors are advised to exercise patience as the company focuses on the development and expansion of its Artificial Intelligence Platform.
Palantir Faces Questions About Monetization of AI Platform
Analysts have mixed opinions on Palantir’s future growth potential as the company faces questions about its monetization strategy for its AI Platform. While management claims there is high customer interest in the platform, details about how and when it will be monetized remain undisclosed.
Analyst Brian Thill, who currently holds a hold rating on Palantir shares, emphasizes the lack of clarity on monetization and timing. Meanwhile, Gil Luria from DA Davidson expresses skepticism about Palantir’s ability to translate AI demand into significant growth acceleration, despite the market’s enthusiasm. Luria maintains a neutral rating but increases his price target from $8.50 to $15.
On the other hand, Raymond James analyst Brian Gesuale paints a more positive picture. He notes that Palantir’s fundamentals are accelerating and highlights the company’s strategic focus on technology and becoming a leading AI solutions provider. Gesuale believes profitability is ahead of schedule, with better-than-expected free cash flow and a strong balance sheet. He also suggests that Palantir might be eligible for S&P 500 inclusion in the next quarter. Gesuale maintains an outperform rating on Palantir’s stock and raises his price target to $22 from $18.
Palantir’s stock has experienced significant growth this year, surging by 180% as compared to the S&P 500’s 18% increase.
Read: Analyst Believes Palantir is ‘the Messi of AI’ with Potential for 45% Stock Jump
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