Palantir (NYSE: PLTR) has led the AI movement since its inception. It knows AI's capabilities better than most because it's used it for decades.
It's also enjoying "unprecedented" demand for one of its latest product introductions, which has helped the stock rise over 30% in 2024. After Palantir's fourth-quarter earnings, the stock hasn't moved. Thus, investors may ponder if they should buy Palantir stock before the next quarterly results event, which could provide better news.
Palantir's AI products are popular. Palantir develops AI-powered technologies to aid businesses and governments with daily activities and internal operations. Palantir's product suite was initially created for government use to process data to identify terrorists or give military commanders the best tactical intelligence.
This program was civilianized, thus expanding Palantir's business. However, Palantir's recent innovation has transformed the company.
Palantir's Artificial Intelligence Platform (AIP) helps developers incorporate generative AI models into the company via tools. In Palantir's Q4 results, Chief Revenue Officer Ryan Taylor said the "level of customer enthusiasm and demand that we are currently seeing from AIP" is unprecedented. Palantir may be growing, which is great news for investors.
The stock is expensive for its growth. Palantir earned $608 million in Q4, up 20% year over year. Its growth rate is slower than many software companies, but it is still good. Zooming past the headline statistic reveals a critical trend.
U.S. commercial income soared 70% to $131 million. As long as management doesn't see demand decline, AIP adoption will likely drive this rapid development.
Because of concerns about how AI should be integrated into military operations, Palantir's government customers have been reluctant to accept AI. Government revenue rose 11% year-over-year. Despite a growing U.S. commercial business, Palantir's $324 million government revenue remains its most important.
If Palantir can increase AIP demand and convince government customers to adopt it, the stock might explode. Many expect the stock to do that in the future, which explains its high price. At 23 times revenue, Palantir is worth more than its growth. Using the price-to-sales (P/S) ratio to assess stock price, this is a quick rule of thumb. However, AI adoption has boosted investor enthusiasm, explaining this premium price.
It should also discourage Palantir stock buying. If you're interested in the company, it may be a good time to buy a few shares to track it, but it's pricey to buy the stock. As a result, I'd be more patient because the market might keep selling the stock like it has for weeks.
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