Palantir (NYSE: PLTR) is one of the companies whose stock has heavily benefited from the ongoing artificial intelligence (AI) revolution, enabling it add over 70% in 2024 alone, with the most recent trading sessions bringing 7.21% in the last five days, and 3.76% as of the latest close.
Palantir’s latest offering, the Artificial Intelligence Platform (AIP), promises to revolutionize the industry by enabling clients to effortlessly incorporate AI into their workflows and internal operations—a goal many companies have struggled to achieve for years.
Management reports an “unprecedented” demand for AIP software, signaling strong future growth prospects crucial for Palantir stock to justify its valuation.
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Palantir expects growing financials and demand in the future
In the first quarter, Palantir saw a 21% increase in overall sales, with U.S. commercial revenue growing 40% year over year, mainly due to the success of the AIP.
However, AIP has yet to be widely adopted by Palantir’s major clients, such as government entities, which are taking time to thoroughly evaluate the product before full integration.
For the second quarter report, scheduled for August 5, Palantir expects revenue of $651 million, reflecting a 24% growth.
Investors are pleased with this acceleration, and management’s raised full-year revenue guidance—from $2.652-$2.688 billion to $2.677-$2.689 billion—strengthens the investment case. This growth is essential to sustain Palantir’s premium stock valuation.
Wall Street is still undecided about PLTR stock
The hesitance and lack of consensus reflect the contradictory views of Wall Street experts, who believe that the “hold” rating dominates the sentiment. Of 13 analysts, three advise a “buy,” six recommend a “hold,” and four are leaning towards a “sell.”
Another worrying fact is that the average price target is set at $22.55, which represents a downside of 20.65% from the current PLTR stock levels.
Perhaps the current sentiment is best explained by the latest price rating from Citi, which maintained its “neutral” rating on Palantir stock with a price target of $25. After visiting Palantir’s New York City headquarters, Citi noted positive momentum in the Commercial and AIP segments, efficient go-to-market strategies, and a bustling office environment.
However, concerns were raised about the timing of government contracts and the early stages of monetizing the AIP product.
Additionally, Palantir’s high valuation—trading at around 24 times the next twelve months (NTM) enterprise value to sales (EV/Sales)—is challenging to justify given its projected mid-to-high teens revenue growth rate, making it hard for Citi and other Wall Street analysts to see positive near-term catalysts.
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