Palantir, one of the leading data gathering and analytics companies, has seen its stock soar more than 250% this year. The company’s inclusion in the S&P 500 has contributed to its strong results. However, investors are now wondering if the stock is still a buy after its big gains.
On the buy side, accelerating growth is a key argument for Palantir. The company’s Artificial Intelligence Platform (AIP) and commercial sector expansion have driven this growth. In recent quarters, Palantir has added numerous commercial customers attracted to its AI platform, with US commercial revenue surging 54% to $179 million. The company also expects to see accelerating growth from the US government, which is starting to adopt its AI offerings.
However, the biggest opportunity for Palantir lies in expanding within its existing customer base. The company has a strong net dollar retention rate of 118%, but most of this growth comes from customers added within the past year. Expanding these customers will drive further revenue growth and increase the stock price.
On the other hand, valuation is a significant concern. Palantir’s forward P/S ratio stands at around 40 times next year’s analyst estimates, which is higher than peak SaaS valuations during similar growth periods. Furthermore, several executives, including CEO Alex Karp and chairman Peter Thiel, have unloaded shares in recent months, indicating they may be taking profits.
Given these factors, investors should consider taking some profits from Palantir stock, especially with its valuation now twice that of peak SaaS valuations just a few years ago.
Source: https://www.fool.com/investing/2024/11/24/is-palantir-a-buy