I am bullish on Palantir Technologies (PLTR) as strong growth momentum in its U.S. commercial business, competitive positioning in its U.S. government business, and reasonable valuation make it look like it could be an attractive buy at current levels.
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Palantir is a leading global data analytics company. For many years it primarily provided data analytics software solutions for U.S. government agencies and its allies, but in recent years has pivoted towards providing similar solutions for the commercial sector. In addition, its Apollo for A.I. platform has opened up additional growth avenues as artificial intelligence applications expand.
In this article, I will lay out various reasons why I am bullish on PLTR stock at its current prices.
Impressive U.S. Commercial Growth Momentum
Fiscal Q1 results for PLTR demonstrated just how strong the company’s growth momentum is in its Foundry business. U.S. commercial revenue grew by a whopping 136% year-over-year, while commercial customers were up 207% year-over-year.
The international commercial business continues to significantly lag behind the domestic segment, but still saw a growth rate acceleration by 200 basis points sequentially from 22% in Q4 to 24% year-over-year growth in Q1.
If the company can continue to generate triple-digit year-over-year growth in its U.S. commercial business, and its international business can continue to steadily accelerate its growth rate, PLTR could see tremendous overall top-line growth.
Strong Gotham Competitive Positioning
In addition to posting stellar growth rates in its U.S. Foundry business, PLTR’s U.S. government business (i.e., Gotham) has a strong competitive position. With nearly a two decade track record of successfully meeting the requirements of no-fail missions for a wide variety of government agencies, PLTR has become the go-to contractor for providing artificial intelligence and data analytics solutions for highly important missions.
When doing business with the U.S. government, trust and relationships are extremely important, and PLTR has continued to win artificial intelligence and data analytics contracts from the U.S. government.
In fact, PLTR is so confident in its ability to continue growing its Gotham business that it stated on its recent earnings call: “Our ambition is to be the sixth prime contractor for the U.S. Federal Government, a trusted partner to deliver complex end-to-end integrated hardware and software solutions, building on the legacy of programs that we prime today.”
Attractive Stock Price
On top of its strengths in both its Gotham and Foundry businesses, PLTR’s stock price looks quite attractive.
For example, the EV/EBITDA multiple is only 23.66x, the price to normalized earnings ratio is 40.73x, and the enterprise value to revenue ratio is a meager 6.75x. The company’s respective historical average ratios for each of those metrics is 93.61x, 137.35x, and 23.29x, so the upside potential is enormous if PLTR can regain its former appeal to the market.
The company also continues to have a strong growth outlook. Through 2026, the consensus revenue CAGR is 33.7%, the consensus EBITDA CAGR is 10.8%, and the consensus normalized earnings per share CAGR is 47.1%. Given the massive total addressable market that PLTR enjoys, and the continued growth in demand for data analytics and artificial intelligence solutions for corporate and governmental organizations, PLTR should have little trouble sustaining a high growth rate for many years to come.
Beyond that, Wall Street analysts have given PLTR a Hold analyst consensus based on two Buy ratings, five Hold Ratings and three Sell ratings in the past three months, the average analyst PLTR price target of $11.28 puts the upside potential at 49.40%.
Summary & Conclusions
PLTR is a leading global software, data analytics, and artificial intelligence company that plays an increasingly critical role in the world. The company’s mission is to ensure that the West maintains a competitive advantage over rivals such as China and Russia in the race for technological supremacy. With the current conflict in Ukraine and soaring geopolitical tensions in East Asia, demand for PLTR’s services from U.S. government and allied agencies is more likely than ever to rise.
On top of that, the commercial business is accelerating its growth in both the U.S. and internationally. Last but not least, the stock price looks quite attractive when comparing current valuation multiples to historical averages, and growth expectations as well as when comparing the current price to the analyst consensus price target.
As a result, it looks like it might be a good time to add shares.
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