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The market is suddenly on shaky ground. But sometimes, the mind lets recent events outshine the big picture. Take Palantir Technologies (NASDAQ: PLTR), for example. The powerhouse artificial intelligence (AI) stock has quickly plunged over 30% from its high. Yet, the stock is still up a remarkable 274% over the past year! In other words, things aren't as painful as they might feel.
Of course, that was the past. Potential investors must now look forward to gauge whether this stock is a buy. Should investors buy Palantir now, or is the stock bound to give up more of its past gains?
Here is what you need to know.
Palantir is genuinely an AI powerhouse
You've probably heard artificial intelligence (AI) referenced more times than you can count. The hype can get a little ahead of reality whenever there's a new technology, especially one with as much potential as AI.
Palantir is a genuinely game-changing AI stock. The company builds custom software applications on its Gotham, Foundry, and AIP technology platforms. These applications use AI, data analytics, and machine learning to produce real-time actionable insights. Palantir helps customers detect fraud, optimize supply chains, coordinate military missions, and do countless other things. Any organization with lots of data could be a potential customer.
Palantir's roots are in government; its work with the U.S. military dates back over a decade. Over half of its total revenue still comes from government business. However, Palantir's momentum in the commercial sector has captivated Wall Street. Revenue has continually accelerated since Palantir launched its AIP platform in mid-2023. Palantir ended 2024 with just 382 U.S. commercial customers. There are over 20,000 large corporations in the U.S. alone. Such flexible software and an underpenetrated market create a massive growth runway for the next decade.
Additionally, Palantir is financially rock-solid. The business is already GAAP profitable, with a stacked balance sheet boasting $5.2 billion in cash and zero debt. Analysts estimate Palantir will grow earnings per share by an average of 25% annually over the long term. Investors have a lot to like here, and it makes sense that the AI stock rocketed higher in a euphoric market.
Putting the stock's valuation in perspective
Here's the thing. As exciting as Palantir's business is, it hasn't kept up with the stock.
Palantir's trailing-12-month revenue has grown 40% over the past three years. Meanwhile, earnings per share have increased an impressive 216%. But the stock? Shares have rocketed over 900%, and that includes the recent decline!