Palantir Technologies (PLTR) is a rapidly growing AI company that has the potential to become a huge long-term winner, rivaling even tech giant Nvidia (NVDA). Despite being smaller than Nvidia, Palantir’s massive growth rate and stellar business model make it an attractive investment opportunity.
Palantir’s software-as-a-service (SaaS) model provides AI-powered software over the cloud via subscriptions, serving customers across various industries. The company has made significant progress in building its commercial business, which now accounts for 44% of its total revenue, while government spending still dominates at 56%.
A key factor behind Palantir’s success is its business model, which generates recurring revenue and produces high operating margins, powerful cash flows, and stable revenue streams. This model allows the company to maintain low capital expenses and count on customer retention, making it easier to acquire new customers.
According to recent data, Palantir boasts impressive profit margins of 38% and a net-dollar retention rate of 118%, indicating its existing customers are increasing their spending on its products by an average of 18% over the past year. In comparison, Nvidia’s free cash flow margin is significantly lower due to its high capital expenditures.
Palantir’s business model success is a critical factor in its long-term potential as a stock winner. Companies with robust business models tend to outperform those with subpar or mediocre ones, especially over the long term. As an investor, evaluating a company’s business model is essential to making informed decisions about which stocks to buy and hold for the long haul.
Source: https://www.fool.com/investing/2024/11/13/pltr-stock-best-ai-stocks-next-nvda-stock