Palantir Achieves $1B Revenues, Is It Too Late to Invest?

Due to the rapid growth of artificial intelligence (AI), large tech companies like NVIDIA Corporation NVDA and Amazon.com, Inc. AMZN have experienced substantial expansion, raising questions about their future growth.  

Instead, emerging companies like Palantir Technologies Inc. PLTR are attracting more investor interest, especially after the company recently achieved record revenue growth and raised its forecast. However, with Palantir’s shares soaring 512% over the past year, is it too late to invest, or does it still offer a solid investment opportunity? Let’s explore—  

Palantir Reports Record Q2, Surpasses $1B Revenues  

Palantir's revenues hit $1 billion for the first time in the second quarter, rising 14% sequentially and 48% year over year. The company's earnings per share (EPS) for the quarter were $0.16, a 78% increase year over year. Both results beat Wall Street's estimates, which projected revenues of $939 million and an adjusted EPS of $0.14. 

Revenues were mainly driven by the U. S. commercial segment, with a steady flow of new customers attracted to Palantir's Artificial Intelligence Platform (AIP). Revenues from this segment reached $306 million, accounting for 31% of total revenues. This was a 20% increase from the previous quarter and a 93% rise year over year.  

Palantir's U. S. commercial customer count grew by 12% sequentially and 64% year over year. Furthermore, existing customers are spending more, as shown by Palantir's net dollar retention rate of 128%. 

Palantir Raises Full-Year Outlook, Confident of Future Growth 

The company increased its full-year guidance, now expecting revenues between $4.142 billion and $4.150 billion, up from the previous forecast of $3.89 billion to $3.90 billion.  

For the third quarter, Palantir projects revenues between $1.083 billion and $1.087 billion, surpassing Wall Street's estimate of $983 million. The company also upgraded its projections for operating income and cash flow for the entire year. 

Additionally, Palantir's remaining performance obligation (RPO), or the revenues guaranteed by contracts but not yet recognized, jumped 77% to $2.42 billion in the second quarter. This indicates potential for future growth, and the outlook remains optimistic. 

Palantir's CEO, Alex Karp, expressed enthusiasm about the company's prospects, stating in the quarterly letter to shareholders that “this is still only the beginning of something much larger and, we believe, even more significant.” 

How to Trade Palantir Stock Now 

Palantir's robust quarter, propelled by AI and optimistic growth outlooks, should reassure investors to hold onto their shares. Also, Palantir's steady defense contracts create significant barriers for new competitors, while an increase in commercial clients points to potential long-term expansion. 

However, with a price-to-earnings (P/E) ratio of 308.1 compared to the Internet - Software industry's forward P/E of 43.56, Palantir's stock appears overvalued relative to its earnings. Therefore, new investors should wait for a price correction or decline before investing. 

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For now, Palantir has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks Rank #1 (Strong Buy) stocks here.

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This article originally published on Zacks Investment Research (zacks.com).

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