One of the prominent players that has arisen in the AI-themed bull market, delivering excellent returns to investors since the rally began in early 2023, is Palantir (NYSE: PLTR). However, PLTR stock has recently declined following the company’s Q1 earnings report in early May.
Despite the quarterly report exceeding expectations on most metrics and the company raising its full-year sales forecast, investors were concerned about one particular area: the slowdown in growth of Palantir’s US commercial segment.
This segment, which includes its AI platform (AIP), saw a 40% year-over-year revenue growth of $150 million. However, this was a significant drop from the 70% growth reported in the fourth quarter of 2023.
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Yet, one investor believes that Palantir has the potential to grow fivefold in value, taking PLTR shares’ price over $100.
Not all essential elements are factored in Palantir’s Q1
Lake Geneva Investor believes the market overreacted to certain Q1 metrics, such as Palantir’s overall US Commercial Revenue Growth, considering them less significant than TCV (Total Contract Value).
‘I believe the market overreacted to certain metrics reported in Q1, such as Palantir’s overall US Commercial Revenue Growth,’ says Lake Geneva Investor. ‘In my view, these metrics are not as meaningful as TCV (Total Contract Value).’
Palantir’s US Commercial TCV grew by 131% year-over-year, up from 107% growth in Q4 2023. This metric is crucial because it best gauges AIP’s scalability, indicating its success in acquiring new customers and upselling existing ones.
Additionally, investors should consider other factors that are not reflected in the Q1 results. This quarter, Palantir has key catalysts, including collaborating with Oracle (NYSE: ORCL) to provide secure cloud and AI solutions to government and business clients and launching the Mixed-Reality OSDK, a platform-as-a-service solution.
5 times growth plausible, but hard to achieve
Lake Geneva believes the odds are heavily in Palantir’s favor. The investor considers the stock an asymmetric bet on AIP, envisioning Palantir as the Salesforce of AI, with a personal target of a 5 times return from current prices.
This optimistic view contrasts sharply with the prevalent sentiment on Wall Street, where analysts expect more modest returns of around 5%, not the dramatic fivefold gains envisioned by Lake Geneva.
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