In midday trading the morning after another strong earnings report, Palantir Technologies Inc. (NYSE: PLTR) cracked the $50 mark. This is a significant milestone for retail investors who have been largely responsible for driving the growth in PLTR stock.
The surge in Palantir stock is due to what Palantir chief executive officer, Alex Karp, described as “a U.S.-driven AI revolution that has taken full hold.” Karp went on to say that when it comes to AI the world will be divided between the AI haves and the have-nots with Palantir’s intention to power the winners. Driving Palantir’s growth is its AIP platform which is helping companies generate meaningful insights from data collected by large language models, which Karp describes as being commodities.
Palantir Cleared a High Bar
For the last several quarters, Palantir has faced a high bar to clear. And so it was that PLTR stock was choppy heading into earnings as investors wondered if the company could exceed its lofty expectations. The results would say the company did just that.
- Revenue of $726 million was up 30% year-over-year (YOY)
- U.S. revenue growth of $499 million was up 44% YOY
- 39% YOY growth in customer count
- Palantir closed 104 deals for over $1 million
- Adjusted operating margin of 39%
- Over $1 billion of free cash flow guidance
- $4.6 billion in cash on hand with no debt
Watch What Institutional Buyers are Doing
The growth in Palantir stock has mostly been the result of conviction from retail investors. However, that is starting to change. To begin with, Palantir was added to the S&P 500 index in September. That means that fund managers who have funds that use the S&P as a benchmark have had to add PLTR stock.
The Palantir Ownership on MarketBeat shows an inflow of $692 million as opposed to $171 million outflow in the last quarter. However, that quarter ended September 30. The current quarter will be the first one that will show the real impact of Palantir’s addition to the index. And with the year coming to a close, more institutions will be looking to add Palantir stock, because investors will demand it.
Analysts May be Coming Around
The Palantir Analyst Forecasts on MarketBeat give the stock a consensus Reduce rating with a consensus price target of $27.86. Keep in mind, analysts are simply looking at the fundamentals and offering an opinion. It’s their job to protect investors from risk, and they view Palantir’s valuation as a risk.
That’s fair, but many analysts were also slow to buy NVIDIA Corp. (NASDAQ: NVDA) and found themselves playing catch-up. This earnings report was another example of Palantir clearing a high bar. There could be more upside to come.
With that in mind, since the report came out at least two analysts have raised their price targets. D.A. Davidson has raised the price target on Palantir to $47 per share from $19. And long-time Palantir bull, Dan Ives, raised his price target to $57.
Where is PLTR Stock Going?
In the short term, you should expect some volatility. To begin with, PLTR stock is trading at more than two times its normal volume which means it won’t take much for big moves one way or another. With PLTR up more than 22% the day after earnings, and 141% in 2024, it wouldn’t be surprising for traders to take some profit.
And while many analysts will say to ignore the election, that may be a mistake as it relates to Palantir. Don’t get me wrong, demand for Palantir software will be unaffected by the election result. But the outcome of the election could dictate monetary policy, particularly as it relates to unrealized capital gains.
A Harris victory could lead to a sharp sell-off as investors ensure they realize their gains in 2024. On the other hand, a decisive victory for the GOP is likely to cause both traders and investors to step on the gas for growth stocks like Palantir along with other technology stocks.
