On Thursday, Citi updated its financial model for Palantir Technologies Inc . (NYSE:PLTR), resulting in an increased price target to $30.00 from the previous $28.00, while keeping a Neutral rating on the stock. The adjustment follows Palantir's robust second fiscal quarter performance, which was highlighted by a significant uptick in growth driven by the resurgence of large U.S. government contracts.
The company's recent success is attributed to its effective strategy, possibly aided by Advanced Integration Partners (AIP), in engaging with the growing artificial intelligence spending sector. Palantir has notably achieved a record number of large-scale customers, engaging in contracts worth eight figures, and a notable 15-point reacceleration in its U.S. commercial business. This has helped balance some weaker performances in international markets.
Citi acknowledges the impressive results of the second fiscal quarter, but cautions that future returns may be limited due to Palantir's high valuation within the software sector. The firm notes that Palantir's next twelve months (NTM) revenue multiple stands at 19 times, with an enterprise value to free cash flow (EV/FCF) ratio of approximately 60 times. This valuation comes in the context of continued irregularities in government contract revenues.
In response to the FQ2 outcomes, Citi has raised its top-line estimates for Palantir for the year 2024 by 4 percentage points and has slightly increased its long-term growth forecast by 1 percentage point. Despite the positive adjustments to the financial forecasts, Citi maintains its stance on Palantir with a Neutral/High Risk rating, with the new price target reflecting the updated estimates.
In other recent news, Palantir Technologies Inc. has announced a partnership with Wendy’s Quality Supply Chain Co-op, Inc. (QSCC) to enhance QSCC’s digital capabilities and integrate artificial intelligence into its operations. The partnership aims to optimize supply chain management and reduce waste. In recent developments, Palantir has also reported significant growth in its second-quarter fiscal year 2024 earnings, with total revenue reaching $678.1 million, a 27% year-over-year increase.
Goldman Sachs has upgraded its financial outlook on Palantir, raising the price target to $16.00 from the previous $14.00. However, William Blair maintained an Underperform rating on Palantir, anticipating a potential decline of over 20% in Palantir shares over the next year. On the other hand, investment firm Wedbush has shown confidence in Palantir's growth trajectory, raising its price target on the company's shares to $38.00.
Palantir Technologies Inc. has reported a robust performance in the second quarter of 2024, with a 30% year-over-year increase in revenue and a 10% sequential growth. The company has raised its full-year revenue guidance to $2.746 billion. Palantir's new initiative, Warp Speed, aims to revolutionize American manufacturing.
InvestingPro Insights
As Palantir Technologies Inc. (NYSE:PLTR) continues to navigate the competitive landscape of artificial intelligence and government contracting, recent data from InvestingPro offers additional context to Citi's updated financial model and price target. Palantir's market capitalization stands at a robust $65.62 billion, reflecting investor confidence in the company's growth trajectory. The company's commitment to maintaining more cash than debt on its balance sheet, as indicated by one of the InvestingPro Tips, suggests a strong financial position that could support sustained expansion and investment in innovation.
Moreover, Palantir's impressive gross profit margin of 81.39% for the last twelve months as of Q2 2024 underscores the company's ability to efficiently manage costs relative to revenue—a key factor in Citi's positive outlook. This is further complemented by a notable revenue growth rate of 21.22% during the same period, showcasing the company's success in scaling its operations and securing lucrative contracts.
InvestingPro Tips also highlight that Palantir is expected to see net income growth this year, with 10 analysts having revised their earnings upwards for the upcoming period. This consensus among analysts could be indicative of Palantir's potential to outperform market expectations and may serve as a catalyst for future stock price appreciation.
For those seeking deeper analysis and additional insights, InvestingPro offers a range of tips, with 20 more listed on their platform, providing a comprehensive understanding of Palantir's financial health and market positioning. For further details, readers can explore the array of metrics and expert opinions available on InvestingPro's dedicated Palantir page.
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