Analyst revamps Palantir stock price target as software firm widens scope

This is what could happen next to Palantir shares.

Jun 16, 2024 - 18:30

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Analyst revamps Palantir stock price target as software firm widens scope

U.S. Adm. Hyman Rickover said nearly 40 years ago that "the more you sweat in peace, the less you bleed in war."

This was back when artificial intelligence was pretty much the stuff of science fiction movies.

Things have changed rapidly since then, in the boardroom and on the battlefield.

"Warfare in this century will continue to be transformed by software," Alex Karp, chief executive of Palantir Technologies (PLTR) , said in his May 6 letter to shareholders.

"Many fear the application of artificial intelligence in the military context, including its potential to make possible more autonomous and indeed self-directed weapons systems," he added.

However, Karp said, it is less fashionable to note that software, including the systems that currently enable target selection and mission planning, "has become as vital to the elimination of an adversary as it is to protecting the innocent from harm."

Palantir Co-Founder and CEO Alex Karp. A veteran analyst assesses the company.
Joe Raedle/Getty Images

Palantir CEO Karp cites commercial business

"The platforms in use by our defense and intelligence partners present a very real threat to the survival of our enemies," he said.

The Denver data-integration and software company's sales are driven largely by helping the U.S. government with its counterterrorism efforts. But the company has also pushed more deeply into managing, interpreting and reporting data for large companies.

"We anticipate that our U.S. commercial business, which accounted for 24% of our revenue last quarter, will remain one of the most significant drivers of our growth in the near term," Karp said.

On May 6 Palantir reported first-quarter adjusted earnings of 8 cents a share on revenue of $634 million, compared with Wall Street’s consensus estimate of 8 cents a share on $625 million.

The company forecast current-quarter revenue to come in between $649 million and $653 million, compared with the $653 million expected by LSEG.

Palantir guided to full-year revenue between $2.68 billion and $2.69 billion, short of the LSEG consensus estimate of $2.71 billion.

The company runs boot camps to show customers how to apply AI to their operations. Karp said Palantir intends "to make our artificial-intelligence platform the most dominant infrastructure in the market and power the effective deployment of artificial intelligence and large language models across institutions."

TheStreet Pro's Stephen Guilfoyle has been keeping a sharp eye on Palantir.

Last month, the veteran analyst told TheStreet’s Conway Gittens, "I'm willing to buy [Palantir Technologies] for myself, for my children and my grandchildren."

"I believe that they are well ahead of other software providers, of other big-data providers on the AI side," he said. "And as long as they can maintain that lead or at least keep the pace up."

The U.S., like many developed economies, Guilfoyle said, "is facing a fiscal crunch probably at some point."

TheStreet's Guilfoyle: 'I come bearing good news.'

"But this firm has put itself into a position...where it's almost inelastic," he said. "The army and the Air Force use it for a number of things. So I think it's core U.S. government business is stable. ... [Now] they're spreading into the corporate side, the commercial side."

Guilfoyle told Gittens that the stock is a "valuation risk."

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"If the stock doesn't grow into its big-boy clothes like I think it will, it's overvalued," he said. "It's plain and simple. So, it's a valuation risk. The sell-side analysts have to acknowledge that, and they are — some of them not."

Guilfoyle added, "You have to buy these stocks [when you view] the profitability; the revenue growth is not at its peak, but the peak is being priced in."

"One of them has to move towards the other for our sake," he said. “For my kids' sake, let’s hope that I’m right and that the revenue growth and the profitability grow into the larger size valuation.”

Guilfoyle, known widely as Sarge, discussed the company again in his June 14 column, telling his "loyal legion of Palantir Technologies investors" that "I come bearing good news from a technological perspective. Rock on."

"I wrote to you all just a little over two weeks ago to let you know that despite what had been a three-month downtrend in the share price, [I had] still been adding and that I was still most definitely a long-term Palantir bull," he said.

Nothing has changed fundamentally, he added, "but we do have a development in our technical analysis of this name, and it's for the better."

Guilfoyle discussed Palantir's 21-day exponential moving average, which takes a stock’s closing prices of the past 21 sessions and averages them out.

The EMA weighs recent price data more heavily than older data, reducing lag time in identifying trends and minimizing false signals.

The simple moving average, on the other hand, is calculated by adding the closing price of a stock or other security over a specific period and dividing the total by the appropriate number of trading days.

Guilfoyle said that Palantir's stock finally not only held its 21-day EMA but retook its 50-day SMA, "which has brought more institutional portfolio managers on board."

The analyst has a target price of $31, which is up from $29.

"Palantir is currently a top-10 holding for me," he said.

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