Palantir Technologies: A Deeper Look into the 'Messi of AI'

Chris Hyzy, Chief Investment Officer at Merrill & Bank of America Private Bank, stated in an interview with CNBC that the current market rally is underpinned by considerable momentum. To understand the extent of this momentum, one must analyze the 'wedge' in the market, according to Hyzy. The easing of fiscal policy by the Fed and China's entry into the market are crucial factors. In the debate over a hard or soft landing, Hyzy argued for considering other possible scenarios instead of focusing solely on these two options. Palantir Technologies Inc, ranked 10th on the AI trend list, recently made headlines by extending a multimillion-dollar deal with the energy company APA Corporation. According to Dan Ives from Wedbush, the 'Messi of AI' will continue to expand its deal flow and the use of its AI applications. Wedbush has rated the stock as 'Outperform' and raised the 12-month price target from $38 to $45. Palantir Technologies Inc excels primarily through its technologies that solve actual business problems. Their solution, Ontology, addresses the famous hallucination problem of AI systems, a capability derived from years of experience in the military and defense sectors. With the Artificial Intelligence Platform (AIP) introduced last year, the company has helped its clients reduce costs and increase profits. Airbus accelerated A350 production by 33%, BP reduced cost per barrel by 60%, and Jacobs Connect lowered energy consumption by 30%. Despite these successes, the stock's valuation remains a point of critique. Palantir Technologies Inc is currently trading at 21.2 times the expected revenue for the next twelve months. For fiscal year 2024, the company expects revenue growth of 24% to $2.746 billion with an operating margin of 35.3%. However, growth forecasts for the coming years are more moderate at 22% annually, potentially leading to revenue of about $4 billion by 2026. If Palantir can improve its margins by one percentage point annually, operating profit could rise to about $1.5 billion by 2026. With a growth multiple similar to the S&P 500 of 2.5 to 2.75, a price-earnings ratio of 46 would result, corresponding to a price target of $27—significantly less than the current $36 per share. Overall, Palantir Technologies Inc holds the 10th position on Insider Monkey's top 10 trend list. While Palantir's potential is recognized, other AI stocks are seen as having greater opportunities for high returns in a shorter period.