Palantir Stock Price Could Skyrocket: Here’s Why?!

Palantir Technologies is a data analytics company that specializes in cyber-defense and artificial intelligence (AI) technology. The company has a history of providing advanced software and analytical/security platforms for government entities, especially U.S. and friendly militaries. The company has two main platforms: AIP and Foundry. AIP is designed for intelligence and defense customers, while Foundry is aimed at commercial customers.

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Palantir has been in the spotlight recently, as the company reported impressive results for the fourth quarter and full year of 2023. The company also announced a surge in AI-related demand, especially from U.S. commercial customers. The company's U.S. commercial revenue soared 70% year over year, driven by a 55% increase in customer count and higher contract values. The company also celebrated its first profitable year and five consecutive quarters of GAAP-measured profitability.

The company's success in the AI market has attracted a lot of attention from investors and analysts. Palantir's stock price jumped 25% last Tuesday after analysts at HSBC downgraded the stock from "buy" to "hold". The downgrade was based on the stock's premium valuation, as the stock trades at a non-GAAP PE of 76.4x for 2024e, compared to the sector median of 35.4x. The premium is even higher on GAAP-based metrics, due to the company's high share-based compensation.

However, the HSBC analyst still believes that the company is built for long-term success, as the company is well-positioned to benefit from the rising demand for AI products. The company also provided bullish guidance for the current year, expecting adjusted income from operations in a range of $834 million to $850 million, well above Wall Street's forecast of $760.3 million.

The company's CEO, Alex Karp, is very confident about the company's prospects, as he said in an interview: "Our commercial business is exploding in a way we don't know how to handle… We don't know what to do with the onslaught of demand." Karp also described the company's Q4 2023 commercial business as "bombastic, baller, incomprehensibly good."

However, investors should be cautious about the company's hype and valuation, as the company faces several challenges and uncertainties. The company's business model is still evolving, as it shifts from large, customized contracts to more commoditized SaaS solutions. The company also faces competition from other AI players, such as Nvidia (NVDA) and Super Micro Computer (SMCI), as well as potential regulatory and ethical issues related to its data and privacy practices.

Moreover, the company's stock price is influenced by the market's sentiment and expectations, which can be irrational and volatile. The company is caught in the AI craze, which can drive the stock price well beyond its fair value. A similar pattern was observed in 2021, when electric vehicle startups dominated the markets, despite producing a tiny fraction of industry sales. The combined valuations of the top 8 EV makers by value were almost as much as all traditional automakers combined, which was absurd.

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