Artificial intelligence (AI) has been the standout trend in 2024, and investors are bullish on AI’s potential as significant tech players pour billions into the sector. Palantir Technologies (NYSE: PLTR), an AI leader, has seen its stock rise 40% year-to-date, with the most recent month bringing in 20% growth.
Financials reflect PLTR stock growth
Palantir’s financial performance reflects its market strength, with $2.33 billion in revenue over the last 12 months and accelerating growth in both government and commercial sectors.
Recent quarters have shown a resurgence in revenue growth, up 21% year-over-year, signaling strong investor confidence.
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Palantir’s revenue growth is expected to continue as more organizations adopt AI and software analytics. However, despite its promising prospects, PLT stock appears pricey as of mid-2024.
With a current market cap of $54 billion, Palantir’s trailing price-to-sales ratio stands at 24, reflecting its high valuation relative to sales, not profits. The company’s 8% operating margin suggests limited earnings generation per dollar of sales, although margins are anticipated to improve over time.
Even with projected margin expansions, Palantir remains expensive. Assuming a bullish scenario of 30% annual revenue growth over five years, accelerating from current levels, the company could achieve $8.65 billion in revenue by then. A hypothetical 30% profit margin translates to $2.6 billion in earnings, resulting in a forward price-to-earnings ratio (P/E) of around 21.
This valuation is comparable to the long-term P/E ratio of the S&P 500 index, indicating that Palantir’s stock price already factors in optimistic expectations of robust revenue growth and margin expansion. These factors suggest caution for investors considering Palantir at this point in 2024.
Technical analysis of PLTR stock
Investors have consistently paid higher prices for Palantir stock over time, and the stock shows a medium—to long-term upward trend channel.
This reflects growing investor optimism and suggests the potential for continued gains. Currently, the stock is approaching resistance around $26.
Failure to surpass this level could trigger a negative market response, plunging the PLTR stock price to the nearest support level, identified at $20.
Historical trading patterns show high volume during price peaks and low volume during troughs, reinforcing the current upward trend.
With a relative strength index (RSI) in an upward trend, approaching the 70 mark, the PLTR stock becomes slowly overbought, further supporting its positive movement.
Technical indicators paint a bullish picture for PLTR stock, and a close above the resistance zone at $26 could trigger further positive movement.
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Disclaimer: The content on this site should not be considered investment advice. Investing is speculative. When investing, your capital is at risk.
