Palantir Technologies (PLTR) stock skyrocketed 23.5% in the last trading session, driven by the company’s powerful third-quarter report that beat Wall Street’s estimates. The software-as-a-service provider reported a 30% year-over-year increase in revenue and a 43% surge in adjusted earnings per share.
CEO Alex Karp attributed the growth to “unrelenting” demand for artificial intelligence (AI) solutions, which drove revenue from government and commercial businesses by 33% and 27%, respectively. Palantir’s business model generates recurring revenue through subscriptions, resulting in high profit margins and predictable revenue streams.
The company’s free cash flow margin was a notable highlight, exceeding 57% in the third quarter. This indicates that Palantir is generating significant cash from its operations. Additionally, Palantir has limited exposure to China, which reduces the risk of potential disruptions to its business due to export restrictions or government actions.
Despite a high valuation, many investors see the benefits of investing in Palantir as worth the premium. The company’s projected earnings growth rate of 48% this year and 58.8% over the next five years, combined with its powerful free cash flows, justify the stock’s current price-to-earnings ratio of 127 times projected 2025 earnings.
Investors who are new to Palantir or considering adding it to their portfolio may want to consider dollar-cost averaging (DCA) to mitigate potential volatility. By gradually increasing investments over time, investors can minimize the impact of short-term market fluctuations and take advantage of long-term growth opportunities.
Source: https://www.fool.com/investing/2024/11/12/pltr-stock-earnings-best-ai-stocks-to-buy-now