Palantir’s boring but profitable path forward
The defense-tech bro swagger of Palantir Technologies CEO Alex Karp has been a key to capturing the attention of an intensely loyal retail shareholder base for the company.
The stock’s 340% share surge last year and its position as the best-performing stock in the S&P 500 didn’t hurt either.
But there’s an irony embedded in the stock price.
The key to Palantir delivering the kind of earnings that would justify the insanely high valuation that retail enthusiasm created — its forward price-to-earnings multiple is 155, and forward price-to-sales is nearly 50 — isn’t the kind of death-from-above AI drone tech that excites self-identified Palantirians.
Rather, it’s almost certainly the kind of watching-paint-dry boring yet insanely profitable business of flogging high-margin software packages to giant corporations.
Wedbush tech analyst Dan Ives wrote in a brief note sent Thursday (emphasis his):
“Palantir has been a major focus during the AI Revolution with expanding use cases for its marquee products leading to a larger partner ecosystem with rapidly rising demand across the landscape for enterprise-scale and enterprise-ready generative AI.
This will be a major growth driver for the US Commercial business over the next 12 to 18 months as more enterprises head down the AI path with Palantir. We believe Palantir has a credible path to morph into the next Oracle over the coming decade with [its Artificial Intelligence Platform] leading the way as many on the Street continue to be huge skeptics of the Messi of AI.”
Palantir has a long way to go before becoming an Oracle-level profit producer. In the most recent quarter, Palantir earned just $143 million, whereas Oracle made about $3.4 billion. Closing the gap would be an impressive feat of corporate execution.
Will Palantir’s shareholders be willing to stick around to see if this yearslong effort of operational ups and downs bears fruit? Or will they, perhaps justifiably, jump ship in search of the next hot thing? Given the hyperactive spirt of the markets at the moment, I wonder.
“Palantir has been a major focus during the AI Revolution with expanding use cases for its marquee products leading to a larger partner ecosystem with rapidly rising demand across the landscape for enterprise-scale and enterprise-ready generative AI.
This will be a major growth driver for the US Commercial business over the next 12 to 18 months as more enterprises head down the AI path with Palantir. We believe Palantir has a credible path to morph into the next Oracle over the coming decade with [its Artificial Intelligence Platform] leading the way as many on the Street continue to be huge skeptics of the Messi of AI.”
Palantir has a long way to go before becoming an Oracle-level profit producer. In the most recent quarter, Palantir earned just $143 million, whereas Oracle made about $3.4 billion. Closing the gap would be an impressive feat of corporate execution.
Will Palantir’s shareholders be willing to stick around to see if this yearslong effort of operational ups and downs bears fruit? Or will they, perhaps justifiably, jump ship in search of the next hot thing? Given the hyperactive spirt of the markets at the moment, I wonder.
