Palantir Technologies
stock was soaring Tuesday. The company’s success in getting commercial deals for its analytics software looks to have overridden concerns over future government deals.
Palantir
shares were up 18% at $19.71 in premarket trading after fourth-quarter earnings beat expectations.
The software company has been a stock-market darling amid excitement over artificial intelligence but has been hit in recent months by worries raised by some analysts over its relationship with the U.S. Army. That sent the stock down from around $20 at the start of the year to $16 in recent trading.
While Palantir’s exposure to federal-government contracts has been the subject of debate, it has consistently argued that the bigger opportunity lies in commercial deals. That looked to be borne out in the latest results as it reported 70% growth in the U.S. commercial business, although its overall revenue remains weighted toward government deals.
“Palantir is capitalizing on its expanded market opportunity with a GTM [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,” wrote D.A. Davidson analyst Gil Luria in a research note Tuesday.
Luria raised his target price on Palantir to $19 from $18, although he kept a Neutral rating on the stock.
Palantir’s success has made it a standout software stock as investors bet on AI investment moving beyond hardware providers. However, its high valuation might still be an obstacle to winning over Wall Street. The company traded at a price-to-earnings multiple of around 56 times based on its closing price on Monday, according to FactSet.
“Shares lost their momentum in November and December following negative news associated with the U.K. NHS and U.S. Army Vantage contracts. We expect more negative contract developments and slowing U.S. commercial growth to result in share downside over the next 12 months,” wrote William Blair analyst Louie DiPalma in a research note Tuesday.
DiPalma kept an Underperform rating on Palantir stock, noting it was trading at a significant premium to fellow software company
Workday
despite the two growing at similar rates.
Workday stock was flat in premarket trading. Other data software and AI stocks also were muted with
Snowflake
stock up 0.5% and
International Business Machines
up 0.1%.
Write to Adam Clark at [email protected]
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