Palantir Technologies (PLTR.N) saw a nearly 20% increase in share price on Tuesday as investors were encouraged by the company’s robust revenue growth in the fourth quarter, which was driven by a rise in demand for its artificial intelligence (AI) products.
Palantir’s commercial sector generated $284 million in revenue in the reporting quarter, up 32% year over year. This helped the business surpass LSEG forecasts for overall revenue, which came in at $608 million.
The Denver, Colorado-based company’s AI platform saw a spike in demand, allaying fears of a slowdown at its largest segment—which services the U.S. government—caused by contract timing uncertainties.
Palantir’s “future” is its AI program, which was introduced in April of last year, according to CEO Alex Karp, who is counting on a robust demand from American businesses.
In less than a month, Palantir’s stock was raised by Jefferies from “underperform” to “hold,” stating, “We are impressed with AI Platform (AIP) ramping faster than our initial expectation.”
The “highlight” of the report, according to Jefferies, was Palantir’s adjusted free cash flow prediction, which aims to reach between $800 million and $1 billion in 2024.
Analysts voiced concerns about Palantir’s shares’ high valuation, which has roughly doubled over the last 12 months, despite the company’s outstanding success.
Based on LSEG statistics, Palantir has a median price-to-earnings (PE) ratio of 53.19, which is much higher than the industry median of 17.60. A more appealing investment opportunity is indicated by a lower PE multiple.
The company still has work to do to justify a higher multiple given uneven execution, a notable slowdown across its government business, and a lack of traction for AI in Europe, according to Mizuho analyst Matthew Broome.
With an average recommendation of 17 brokerages tracking the stock at “hold” and a consensus price target of $18.50, which suggests an 8% decline in shares from its most recent trading price of $20.14 over the next 12 months, Wall Street is still mostly in the dark.
