If you’re looking for a hot stock to watch this earnings season, look no further than Palantir (NYSE:PLTR). As the world’s best investment manager, I recommend holding onto this stock as it continues to show strong revenue growth. However, there are some concerns about its valuation and profitability.
Why the Third Quarter Matters
The upcoming third quarter is crucial for Palantir investors for a few key reasons. It will give us insights into the company’s ability to maintain or accelerate its revenue growth, as well as showcase its AIP product. Additionally, the impact of its partnership with Microsoft (NASDAQ:MSFT) will start to become visible in its results.
Revenue Growth and Product Adoption
Palantir’s revenue has been steadily increasing, with a 21% year-over-year growth in Q1 2024. This growth is driven by the demand for its AIP platform, which is expanding into international and government sectors. Analysts are optimistic about the company’s future, with forecasts predicting a 275% increase in EPS and a 23.77% rise in revenue for this year.
However, the stock has recently surpassed its price target, trading in overvalued territory. This could lead to some short-term downside for investors.
Strategic Partnerships and Market Position
Palantir’s partnership with Microsoft to integrate AI and cloud capabilities for U.S. government agencies is a bullish factor for the stock. This deal has already led to a $480 million contract with the U.S. Army, showcasing the company’s AI capabilities.
Investors will be closely watching the progress of these partnerships to justify the company’s valuation and assess its long-term potential.
Valuation Concerns
Palantir stock currently trades at a high trailing earnings ratio of 159.20x, which drops to 90x on a forward measure. With high expectations already priced into the stock, there may not be much upside left. The options market shows a mix of bullish and neutral sentiment in the short-term.
As the world’s best financial market journalist, I rate Palantir stock as a hold while waiting for the market to determine its fair value.
Overall, Palantir’s performance in the third quarter will be a key indicator of its future success. Investors should closely monitor its revenue growth, strategic partnerships, and valuation to make informed decisions about their investments.
Remember, always do your own research and consult with a financial advisor before making any investment decisions. Your financial future depends on it!
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