Palantir (NYSE:PLTR) is one of the names closely associated with the AI-themed bull market and a stock that has delivered for investors excellent returns since the rally kicked off at the start of 2023. However, recent times haven’t been quite as bountiful, and the stock has been mainly in selloff mode since the big data company’s early May Q1 earnings.
The pullback has taken place against a backdrop of a quarterly report that beat expectations on most metrics while the company even raised its full-year sales guide. But it only takes one wonky metric for investors to show their displeasure, and in Palantir’s case, it appeared to be the slowdown of growth in its US commercial segment that investors chose to focus their ire on. The segment, which is home to its AI platform (AIP), posted year-over-year growth of 40%, delivering revenue of $150 million. But that represented a meaningful drop from the 70% growth notched in 4Q23.
Yet, according to one market watcher, investors have got the wrong end of the stick here.
“I believe the market overreacted to certain metrics reported in Q1, such as Palantir’s overall US Commercial Revenue Growth,” says Lake Geneva Investor. “In my view, these metrics are not as meaningful as TCV (Total Contract Value).”
Here, growth actually accelerated as Palantir’s US Commercial TCV increased by 131% compared to the same period a year ago, improving on Q4 2023’s growth of 107%. And this is the metric that really matters. “TCV is the most critical metric, in my view because it serves as the best gauge for AIP’s scalability,” Lake Geneva explained. “This figure indicates the company is successful in scaling its AIP business by finding new customers and upselling existing ones.”
There are other elements investors should focus on that were not factored into the Q1 results. There are a couple of catalysts taking place this quarter, one being the collaboration with Oracle, whereby the two companies will provide secure cloud and AI solutions to both government and business clients, and the launch of the Mixed-Reality OSDK, a solution the company has called a Platform as a Service.
In fact, looking ahead, Lake Geneva thinks the odds are stacked heavily in PLTR’s favor. “Overall,” the investor summed up, “I believe this stock remains an asymmetric bet on AIP. I see Palantir becoming the Salesforce of AI, and my personal target is 5X from current prices.”
Unsurprisingly, then, Lake Geneva rates PLTR stock a Strong Buy. (To watch Lake Geneva’s track record, click here)
That take, however, stands in quite a contrast to the prevalent view on Wall Street. Based on a mix of 7 Holds, 3 Sells, and 2 Buys, the stock receives a Hold consensus rating. There are no anticipated 5x gains among analysts; rather, 5% returns are expected, considering the average target stands at $22.11. (See PLTR stock forecast)
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Disclaimer: The opinions expressed in this article are solely those of the featured investor. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.
