Palantir shares rise 20% and continue to silence skeptics

Palantir Technologies Inc. NYSE:PLTR shares rose 20% in after-hours and premarket trading following a strong earnings report. The company reported after the close on Feb. 5 and provided several highlights.

The company made earnings per share (EPS) of eight cents on revenue of $608 million. EPS was in line with analysts’ estimates and revenues exceeded the expected $603 million. This was also a 20% year-over-year (YOY) increase. The company’s operating margins jumped from 29% to 34%.

What seems to particularly excite investors is the company’s forward guidance. For example, the company forecasts annual revenue of $2.65 billion to $2.66 billion for 2024. The midpoint of that forecast would be another 20% year-over-year gain.

Additionally, the company expects to generate adjusted free cash flow of between $800 million and $1 billion. To put that in perspective, the company generated $305 million in adjusted free cash flow in the current quarter. Its cash balance increased to $3.7 billion from $3.3 billion in the previous quarter.

More or less the same for Palantir

Palantir critics continually look at the company with the “yes, but” attitude that is becoming common among AI stocks. When the company went public via direct listing in 2020, nearly 100% of the company’s revenue came from government contracts. This has led to cries yes, but what about commercial growth?

The company has steadily expanded its business, but this quarter took it to a whole new level. Palantir has grown its commercial revenue by 70% year over year and expects 40% growth in its commercial sector this year.

The reason for that growth stems, in large part, from the company’s artificial intelligence (AI) platform, AIP. The company’s go-to-market strategy for its AIP platform is a series of AI bootcamps that the company says can move customers “from 0 to use case in 5 days.” In the company’s earnings presentation it was reported that more than 465 organizations took part in the bootcamps.

But that leads skeptics to wonder how Palantir will enter the market with its government customers when bootcamps become unworkable. Palantir acknowledged that this process will be slower, but it is well underway. And the company has a significant advantage in this area.

Are PLTR shares buyable or hold?

From a strictly technical standpoint, PLTR stock has been here before. In November 2023, the stock hit a 52-week post-earnings high. The same price action occurred following the company’s August earnings report.

In both cases, the stock retired shortly thereafter. And the relative strength indicator for PLTR stock is around 71, which suggests the stock is now overbought.

However, each time Palantir shares have retreated, the result has been a higher low for the stock.

This would suggest a hold and wait to see where the price stabilizes. It’s also important to note that the company’s 20% year-over-year growth is impressive but perhaps not enough to justify the current surge in the stock price.

But will third time be lucky for Palantir shareholders? While a slight pullback is likely, analyst sentiment is clearly changing. Since the company released earnings, Palantir analyst ratings on MarketBeat prove it Citigroup Inc. NYSE:C AND Jefferies they updated PLTR. Raymond James reiterated its Outperform rating while raising its price target from $22 to $25.

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