Palantir (NASDAQ:PLTR) stock has experienced a remarkable 343% growth in 2024, propelling its valuation to pretty high multiples from just about every angle.
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With PLTR now trading at 49x EV/FY25 revenues, one could be forgiven for questioning whether the high-flying stock is soaring too close to the sun.
On the flip side, Palantir bulls would argue that the company’s strong and somewhat unpredictable growth patterns make traditional valuations for the AI data company less relevant.
Top investor Gary Alexander is firmly in that camp, believing Palantir plays by its own set of rules – ones that don’t fit the usual corporate mold.
“I don’t think near-term valuation multiples are altogether meaningful for a software company whose growth itself has proven quite unpredictable (and in always surprising to the upside),” writes the 5-star investor, who sits in the top 1% of TipRanks’ stock pros.
Citing Palantir’s 30% year-over-year revenue growth in Q3, Alexander concedes that lofty valuations present a risk. Nevertheless, he argues that short-term multiples fail to capture the full scope of Palantir’s potential, as the company is nowhere near navigating a “‘normal’ decelerating growth curver.”
Moreover, when it comes to growth, according to the investor, Palantir has plenty of runway up ahead, both at home and abroad. This is particularly true for U.S. government contracts, as defense spending is expected to be a priority under GOP leadership.
“I firmly believe a Trump presidency will benefit Palantir’s America-first ethos and its longstanding partnership with U.S. defense entities,” Alexander opined. “Its potential to land large government deals with the new administration is broad.”
On the commercial side of the ledger, the investor also points to plenty of opportunities for Palantir to expand its customer base.
“The company has barely ~500 customers and is just getting started,” notes Alexander. As roughly two-thirds of these private sector clients are in the U.S., the investor argues that Palantir has the potential to greatly increase its business overseas.
Alexander admits his outlook could shift if Palantir’s growth slows to the low 20% range or if its margins cease to improve. For now, however, he’s sticking with his bullish stance, concluding that the best move is to “stay long here and hold out for further gains.” As such, he gives PLTR shares a Buy rating. (To watch Alexander’s track record, click here)
Wall Street, however, seems to believe that the rapid growth has gone too far. With 2 Buy, 8 Hold, and 6 Sell recommendations, PLTR has a Hold (i.e. Neutral) consensus rating. Its 12-month average price target of $41.33 implies a ~46% downside from current levels. (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.
