- Palantir Technologies has improved its fundamentals and is on track to be profitable in the long term.
- The company’s shares have been supported by increased interest in AI plays, leading to a 74% increase in share price since February.
- Palantir’s recent earnings showed mixed results, with slowing revenue growth but continued customer growth and improving profitability.
This article discusses Palantir Technologies Inc. (PLTR) and its recent performance, as well as its long-term prospects. Here are the key points from the article:
- Fundamental Improvement: Palantir has improved its fundamentals in recent quarters and is on track to achieve long-term profitability. It recently reached GAAP profitability, demonstrating the viability of its business model.
- Increased Interest in AI Plays: Palantir’s shares have been supported by growing investor interest in Artificial Intelligence (AI) companies. Since February, the company’s shares have risen by 74%, outperforming the S&P 500 during the same period.
- Mixed Q2 2023 Earnings: In its Q2 2023 earnings report, Palantir reported revenues of $533 million, a 13% YoY increase. While reaching GAAP profitability during challenging economic conditions is considered a milestone, revenue growth has slowed down significantly compared to its target of 30% annual growth.
- Customer Growth: Palantir continues to gain new customers, with a total count of 421 at the end of Q2 2023, representing a 38% YoY increase. However, new customers are not spending as much on Palantir’s solutions, likely due to a focus on cost-cutting in the current economic environment.
- Profitability: Despite slowing revenue growth, Palantir has been improving its profitability, reporting positive GAAP operating income for two consecutive quarters. This positions the company for potential earnings growth in the future.
- AI Prospects: Palantir is bullish on AI and has launched the AIP platform to leverage AI capabilities. However, the impact of AI on its financials remains uncertain until the revenue generated by these platforms is disclosed.
- Valuation: Palantir’s valuation has become less speculative and more earnings-based. It currently trades at over 60 times forward earnings. The article suggests that Enterprise Value to revenue remains a better metric for valuing the company, and it is currently trading slightly above its historical average.
- Conclusion: The article concludes that Palantir’s fundamentals have improved, but its growth has slowed down. It suggests that the company is fairly valued at present and may trade sideways in the near term. It recommends a “Hold” on Palantir’s stock.
In summary, the article acknowledges Palantir’s progress in achieving profitability and its strong customer growth but notes the slowdown in revenue growth and suggests that the stock is currently fairly valued. It takes a cautious stance, recommending holding the stock rather than further accumulation.
