Shares of Palantir Technologies (NASDAQ: PLTR) exploded 27% higher today (4 February). This follows the software company’s fourth-quarter earnings, which once again crushed Wall Street’s estimates.
Incredibly, the share price is now up 1,557% since the start of 2023! As I write, this means a £20k investment made inside a Stocks and Shares ISA back then would have mushroomed into roughly £332k (discounting currency moves).
That even leaves fellow AI stock Nvidia in the dust — it’s up ‘just’ 700% in this period.
Unfortunately, I’ve never owned the stock, despite considering it a handful of times since it went public in 2020. Should I now rectify this costly oversight? Let’s take a look at the earnings.
Palantir scores a hat-trick
For the fourth quarter, Palantir reported that revenue grew 36% year on year to $828m. This was better than the $776m that analysts were expecting (beat number one).
Next, the company’s adjusted earnings per share (EPS) climbed 75% to $0.14. Again, this was higher than Wall Street was anticipating ($0.11). So that was beat number two.
Finally, management offered better-than-expected guidance for 2025. It sees full-year revenue of $3.75bn (31% growth), higher than the $3.52bn that was previously expected.
What we have here then is a big double beat (on the top and bottom lines) and a guidance raise. Palantir’s revenue continues to accelerate!
Why is this happening?
The thing that’s fuelling all this growth is the company’s Artificial Intelligence Platform (AIP). This is helping organisations and enterprises harness AI to analyse vast amounts of data, automate complex tasks, and maker smarter decisions. It can uncover patterns and forecast future trends in real time.
The numbers speak for themselves. US commercial revenue in the quarter rocketed 64% to $214m, while US government revenue jumped 45%. Its customer count grew 43% as it closed 129 deals worth at least $1m, 58 deals of at least $5m, and 32 deals worth no less than $10m!
Eccentric CEO Alex Karp is always worth quoting. In Palantir’s letter to shareholders, he said: “We have the products and reach of an established incumbent and the speed, growth, and agility of an insurgent startup. It is that most lethal of combinations.”
In Q3, he said that a “juggernaut is emerging“. In Q4, the CEO confirmed that the “software juggernaut has indeed emerged“. The juggernaut, of course, being Palantir.
In many ways, Karp reminds me of David Goggins, the former Navy SEAL turned motivational speaker. If I want motivation to get up on a cold morning to go for a run, or finish that last mile, I could put on one of his rousing YouTube speeches.
Likewise, if I ever doubt the AI revolution has legs, I can tune into Karp’s quarterly commentary on AI. Reassuringly, he says: “We are still in the earliest stages, the beginning of the first act, of a revolution that will play out over years and decades.”
Insane valuation
Make no mistake, these numbers are mightily impressive. However, I’m still left with the impression that this high-quality stock is grossly overvalued. Based on the 2025 forecast, it’s now trading at a price-to-sales (P/S) ratio of around 64.
In my experience, it’s dangerous to invest at this multiple. So I think investors considering the stock should tread carefully.
