Analysts revamp Palantir price targets as AI demand drives profit surge

Analysts see Palantir taking AI profit to the next level.

Feb 6, 2024 - 20:30

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Analysts revamp Palantir price targets as AI demand drives profit surge

Updated at 9:09 AM EST

Palantir Technologies (PLTR) - Get Free Report shares soared in early Tuesday trading after the data-analytics group co-founded by billionaire Peter Thiel blasted Wall Street's fourth-quarter-profit forecasts and said AI demand would likely drive faster earnings growth over the coming year.

Palantir is developing a foothold in the artificial-intelligence-technology world with its AIP Logic platform, which enables companies to build specific functions that leverage its large language model data without having to use complex computer coding.

"AIP is the AI-powered operating system for the enterprise, not a Q&A bot, not an agent framework, not a way to dabble, but a way to deliver," Palantir's chief operating officer, Shyam Sankar, told investors on a conference call late Monday.

AIP, alongside Palantir's legacy government business, which is tied in part to its work with the Central Intelligence Agency, is helping the Denver group power an impressive profit surge while carving out a increasing share of the commercial AI marketplace.

Palantir saw 2023 revenue growth of around 70% in its U.S. commercial operations, up from 32% in 2022, with a record number of new deal signups valued at more than $1 million, thanks to its AIP pilot and boot camp programs.

That segment is likely to see further outsized gains this year, the company indicated, with U.S. revenue forecast to rise 40% from 2023 levels.

“Our experts indicate that U.S. commercial is a high-growth opportunity for the company as more enterprises increase their AI investments," said Third Bridge analyst Jordan Berger. "Palantir appears to be successfully capitalizing on this AI excitement with its AIP offering, but the degree to which this initial success translates into long-term growth remains to be seen.”

Palantir's overall revenue is set to rise around 20% from 2023, to between $2.65 billion and $2.67 billion, with profit surging fourfold to between $834 million and $850 million.

Palantir on prime-time Broadway: analyst Ives

"A handful of times every decade there are tech companies that are so ahead of the competition and in a sweet spot of the future growth ... yet [Wall Street] at the time dismisses it by dusting off their long-term stubborn bear thesis and 30 spreadsheets," said Wedbush analyst Dan Ives.

"Last night for Palantir was when this company went from an off-Broadway play to a prime-time theater right off of Times Square under the bright lights, " he added.

*Palantir could soon be included in the S&P 500, says Wedbush analyst Dan Ives.*
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Ives lifted his price target by $5, to $30 a share, while reiterating an outperform rating. He added that "we also believe inclusion to the S&P 500 is on the near-term horizon given this pace of profitability."

D.A. Davidson analyst Gil Luria also lifted his price target on the group, albeit by a more modest $1 per share, to $19. He rates the shares neutral.

"Palantir is capitalizing on its expanded market opportunity with a [go-to-market strategy] that is resonating with customers, and the company is set up to continue accelerating growth into 2024 from durable interest in its platform," Luria said.

Citi analyst Radke spotlights PLTR free cash flow

Citi analyst Tyler Radke was also impressed by last night's earnings, which included a bottom line profit of 4 cents a share, its fifth consecutive quarterly profit.

Radke added $10 to his price target, taking it to $20 a share, while upping his rating to neutral from sell. He cited an 'inflection" in profit potential at the group's U.S. commercial business and its free cash flow improvements.

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Palantir said free cash flow could approach $1 billion this year, a near 37% improvement from 2023 levels.

"What you see is a convergence of our product being easier to use, an augmentation of its charisma, both driven by developments in AI, large language models, which make the product approachable foundry to the broader market," Chief Executive Alex Karp told investors late Monday.

"This is a revolution for incumbents that have distribution and already strong products, which is why we're massively outperforming," he added.

Palantir shares were marked 21% higher in premarket trading to indicate an opening bell price of $20.22 each, a move that would extend the stock's one-year gain to around 143% and value the group at around $50 billion.

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