[ad_1]
One of the biggest investment themes of 2023 was artificial intelligence (AI). The Magnificent Seven stocks, in particular, have accelerated the rally across the major indexes, a momentum that (for now) appears to carry over into 2024.
As the market rises, there is one company that is particularly interesting to me. Palantir Technologies (NYSE:PLTR). Data analysis specialists are currently S&P500 Index; However, based on generally accepted accounting principles (GAAP), the company has been profitable for four consecutive quarters, and may be close to being included in the index.
The stock price is up almost 150% over the past year, and I think there are many reasons why the stock price could rise even further in 2024 and beyond. Let’s dig into how Palantir is disrupting the AI market and why the company looks well-positioned to dominate long-term.
AI market overview
When it comes to artificial intelligence (AI), big tech companies are likely to get involved, including: microsoft, Amazonor alphabet please remember. There’s a good reason for that.
About a year ago, Microsoft invested billions of dollars in ChatGPT developer OpenAI, starting an AI arms race. Naturally, both Alphabet and Amazon quickly responded by investing in their own OpenAI competitor called Anthropic. In addition, the following companies are salesforce.com is relentlessly pursuing AI and is leveraging a number of past acquisitions to do so.
In fact, big tech companies certainly have a strong influence on the AI market. However, investors should be aware that other companies will likely emerge as leaders as the AI market continues to evolve. Although Palantir is still a fraction of the size of the big tech groups, the company is considered one of the best AI software providers.
What is Palantir doing with AI?
For several years, Palantir’s software platform was sold under three names: Apollo, Gotham, and Foundry. Additionally, the company has fostered strong ties with the U.S. military and Western allies since its founding nearly 20 years ago. For these reasons, many investors viewed the company as a government contractor and were skeptical of its prospects beyond a large public sector deal stream.
But last year, Palantir released its latest development amid all the AI buzz: the Palantir Artificial Intelligence Platform (AIP). Thanks to some of the company’s actions, investors now have a fairly solid understanding of how AIP is being received.
To sell its new AI software, Palantir has started hosting “boot camps.” These immersive seminars allow prospective customers to demo his Palantir’s various products and identify their specific use cases for AI and how Palantir fits into the equation.
So far, this creative lead generation strategy seems to be resonating with customers. Over the past year, Palantir has increased private sector revenue by 23%. This is almost twice as much as traditional government operations. In addition, customer numbers in the commercial sector rose 45% year-on-year in the 12 months to 30 September.
While the bootcamp is encouraging, investors should recognize that Palantir is yet to truly reap long-term benefits. In the long run, the company should have ample opportunity to improve its customers’ unit economics by upselling and cross-selling new products and services. That, in turn, should lead to increased revenue and profitability for Palantir.
Should you invest in Palantir stock?
The graph above benchmarks Palantir against a group of competing enterprise software companies on a price-to-sales (P/S) basis. Investors should be aware that SaaS (Software-as-a-Service) growth businesses can be more volatile than mature blue-chip stocks. Nevertheless, Palantir’s P/S multiple of 18.2 puts him practically in the middle among this peer set, and is right in line. ServiceNow and Mongo DB. Furthermore, the company’s current P/S multiple is about the same as its long-term average of 18.6x.
For me, this evaluation is a little interesting. Since Palantir’s initial public offering in 2020, its private sector business has grown significantly, allaying concerns about the company’s reliance on government business. Additionally, the company’s balance sheet has been significantly strengthened due to its strong free cash flow and liquidity profile. This gives Palantir the financial flexibility to invest further in research and development (R&D) and release new innovations such as AIP.
However, despite meaningful progress on several fronts, the current valuation effectively puts the company back at historic levels. Given the demand surrounding various applications of generative AI and Palantir’s unique position across both the public and private sectors, I see the company quietly emerging as a leader in enterprise technology. Additionally, Palantir could be an under-the-radar AI opportunity as investor enthusiasm fascinates with larger tech giants.
As the market continues to soar towards new highs, secular trends in AI could drive further gains in the long run. Employing a dollar-cost averaging strategy and building a long-term position in Palantir could be a profitable move.
Should you invest $1,000 in Palantir Technologies right now?
Before buying Palantir Technologies stock, consider the following:
of Motley Fool Stock Advisor Our analyst team has identified what they believe Best 10 stocks What investors can buy right now…and Palantir Technologies wasn’t one of them. These 10 stocks have the potential to generate impressive returns over the next few years.
stock advisor provides investors with an easy-to-understand blueprint for success, including guidance on portfolio construction, regular updates from analysts, and two new stocks each month.of stock advisor Since 2002, the service has more than tripled S&P 500 returns*.
See 10 stocks
*Stock Advisor will return as of January 22, 2024
John Mackey, former CEO of Amazon subsidiary Whole Foods Market, is a member of the Motley Fool’s board of directors. Alphabet executive Suzanne Frye is a member of The Motley Fool’s board of directors. Adam Spatacco has worked at Alphabet, Amazon, Microsoft, and Palantir Technologies. The Motley Fool has positions in and recommends Alphabet, Amazon, Datadog, Microsoft, MongoDB, Palantir Technologies, Salesforce, ServiceNow, and Snowflake. The Motley Fool has a disclosure policy.
The S&P 500 hits a new all-time high. Here’s one artificial intelligence (AI) stock you should buy and make a fist of.Originally published by The Motley Fool
[ad_2]
Source link
