Is Palantir Stock A Buy On AI Outlook, With Earnings Due? (2024)

There's plenty for bulls and bears to hash out over Palantir Technologies (PLTR). Bulls point to improved profitability for PLTR stock. Bears focus on decelerating revenue growth for Palantir stock. Then there's buzz over artificial intelligence stocks to consider.

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Fourth quarter earnings for Palantir stock are due Feb. 5. Morgan Stanley analyst Sanjit Singh holds a bearish outlook on PLTR stock.

"While we think the U.S. commercial business is showing momentum, a sluggish international commercial business coupled with a now-mature government business may make it difficult for the company to meet consensus expectations, which call for growth to accelerate in 2024 to 19% from 16.5% in 2023," he said in a report.

Technical ratings weakened in early 2024 as PLTR stock stayed below its 50-day moving average. As of Jan. 22, PLTR stock has retreated 2.3% this year. Palantir is among AI stocks to watch.

Also, Palantir stock advanced 167% in 2023. The Nasdaq composite climbed 43% while the S&P 500 rose 24%.

PLTR stock hit a new 52-week high on Nov. 21. But Palantir stock reversed after the size of a highly anticipated United Kingdom contract disappointed.

In addition, some investors recently focused on a U.S. Army contract extension.

Artificial Intelligence A Growth Driver?

PLTR stock bulls point to artificial intelligence software as a growth driver.Palantir has already mined the AI opportunity with government customers for intelligence gathering, counterterrorism and military purposes.

Will generative AI spur growth in the commercial market for PLTR stock? The software maker has expanded into health care, energy and manufacturing.

Palantir announced its newest offering, the "Artificial Intelligence Platform," early this year.As of mid-September, Palantir says the AIP now has 150 users, up 50% within the last month.

Palantir has not disclosed pricing for AI products. Analysts say Palantir needs to show progress developing new revenue streams from generative AI.

PLTR Stock: Fundamentals

The company has announced a $1 billion buyback for PLTR stock. But no shares were repurchased in the September quarter.

In addition, PLTR stock trade well below the software maker's all-time intraday high of 45 set in late January 2021.

Meanwhile, Palantir's governance structure gives Karp and co-founder Peter Thiel long-term control of the company through super-voting rights.

The company name is derived from the palantiri, which are crystal ball-like "seeing stones" from the "Lord of the Rings" book and film series. Palantir means "one that sees from afar."

In addition, Palantir engineers often customize software for the needs of customers. That extends the time needed to ramp up "digital transformation"projects. So after Palantir wins a contract it may take awhile to generate revenue.

The Denver-based company offers three platforms. One is Palantir Gotham, used primarily by government agencies. There's Palantir Metropolis for banks, financial services firms and hedge funds. And Palantir Foundry is used by corporate clients.

PLTR Stock: Government Biggest Market

Palantir gets nearly 60% of its revenue from government agencies. Decelerating revenue growth is an issue. In 2022, revenue growth slowed to 24% from 40% in 2021 and 47% in 2020.

Palantir earnings for the quarter ending Sept. 30 were 7 cents on an adjusted basis, vs. 1 cent a year earlier. Revenue rose 17% to $558 million.

Analysts had predicted earnings of 6 cents a share on revenue of $556 million.

Denver-based Palantir said government revenue rose 12% to $308 million, missing estimates for $321 million. But commercial market revenue climbed 23% to $251 million vs. estimates of $234 million.

For the current quarter ending in December, Palantir forecast revenue of $601 million at the mid-point of guidance vs. estimates of $600 million.

Further, Palantir has been profitable using generally accepted accounting principles, or GAAP, for four straight quarters.

Palantir Forges Partnerships

In November 2022 Palantir acquired full ownership of a joint venture in Japan that sells the company's software. Japanese insurance firm Sompo Holdings is the biggest customer.

Then in 2023, Palantir began consolidating revenue from the joint venture in its earnings reports. In addition, a Morgan Stanley report estimates the venture had an annual revenue run-rate of $50 million heading into 2023.

Further, Palantir recently expanded its cloud computing partnership with Microsoft (MSFT) that targets government agencies.

To speed up corporate adoption of artificial intelligence software, Palantir and IBM formed a global partnership. Under the deal, Palantir also made its Foundry software available to IBM's cloud computing customers. The Foundry platform is a centralized data operating system that lets users manage, filter and visualize large data sets.

Meanwhile, one issue for PLTR stock is that large U.S. government contracts are coming up for renewal.

"For the U.S. Department of Defense, the main issue for Palantir is that the government simply is inclined to multi-source and there are viable data analytics alternatives," William Blair analyst Louie DiPalma said in a recent note to clients.

Palantir Stock Technical Analysis

Some technical ratings have dipped. Palantir's Relative Strength Rating stands at 95 out of a best-possible 99.

Also, PLTR stock holds a Composite Rating of 96 out of a best-possible 99, according to IBD Stock Checkup.

IBD's Composite Rating combines five separate proprietary ratings into one easy-to-use rating. The best growth stocks have a Composite Rating of 90 or better.

PLTR stock holds an Accumulation/Distribution Rating of C-plus. That rating analyzes price and volume changes in a stock over the past 13 weeks of trading. A+ signifies heavy institutional buying; E means heavy selling. Think of a C grade as neutral.

Meanwhile, Palantir stock forged a cup base with an entry point of 20.24. As of Jan. 22, shares were not in a buy zone.

Further, check out IBD Stock Lists and other IBD content to find dozens more of the best stocks to buy or watch.

Follow Reinhardt Krause on Twitter@reinhardtk_techfor updates on 5G wireless, artificial intelligence, cybersecurity and cloud computing.

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