- Palantir's Q2 2024 saw a solid revenue increase and a strong operating margin, highlighting robust profitability.
- Significant contract wins and a 70% rise in U.S. commercial revenue underscore the company's expanding market share.
- Analysts project continued growth with EPS estimates with optimistic earnings outlooks and technicals also points to upside for Palantir's stock in 2024.
- Despite a positive forecast, high share-based compensation and competition from major players like Snowflake, Databricks, IBM, and Microsoft Azure poses risks.
I. Palantir Q2 2024 Performance Analysis
A. Key Segments Performance
Financial Highlights
The company's revenue grew by 27% year-over-year last quarter. Net income reached $134 million, reflecting strong profitability. Earnings per share (EPS) stood at $0.09 on an adjusted basis. Profit margins remained healthy with an adjusted operating margin of 37%. Operating income also saw an increase, reaching $105 million. Total expenses grew by 7% year-over-year. The balance sheet remains robust with $4 billion in cash and cash equivalents. Cash flow from operations was $144 million, and free cash flow was $149 million, indicating strong liquidity.
Source: Q2 2024 Presentation
Operational Performance
Operational metrics showed significant improvements. The company signed 27 deals worth $10 million or more. Total contract value (TCV) nearly reached $1 billion. Existing customers are expanding their contracts, driven by the company's AI platform, AIP. US commercial revenue, excluding strategic contracts, increased by 70% year-over-year. The US commercial annual contract value (ACV) grew by 44% year-over-year. The deal count in the US commercial sector nearly doubled compared to the previous year.
Product Sales Breakdown
Several notable product expansions were reported. Tampa General deployed AIP to reduce patient length of stay by 30%. Panasonic Energy expanded AIP across finance, quality control, and manufacturing. AARP utilized AIP for personalized experiences for 29 million visitors. Eaton deepened its relationship with AIP for ERP modernization and other use cases. Kinder Morgan expanded its AIP use for storage optimization and pipeline monitoring. These expansions highlight the versatility and demand for AIP across industries.
Market Share Analysis
The company's market share continues to grow. US commercial customer count increased by 83% year-over-year. The US government segment showed strong performance, with revenue growing by 24% year-over-year. International government revenue also saw an 18% sequential increase. These gains indicate a strengthening foothold in both domestic and international markets.
Source: Q2 2024 Presentation
New Product or Technological Advancements and Innovations
The company continues to innovate with new product launches. The AIP platform has been instrumental in these advancements. The company launched Warp Speed, a manufacturing operating system. This system leverages industrial AI and ontology for improved production processes. The platform aims to transform American manufacturing, echoing historical industrial mobilizations. Additionally, the company received a notable contract from the Department of Defense. This contract will scale AI-enabled systems across the DoD, demonstrating the critical importance of their software.
B. PLTR Stock Price Performance
Palantir Technologies' market cap stands at $58.201 billion as of Q2 2024. The stock opened at $22.97 and closed at $25.32. During the quarter, highs reached $26.57, and lows hit $20.33. During Q2, PLTR stock price saw an 11.17% increase. This performance outpaced major indices. The S&P 500 returned 3.97% in the same period. The NASDAQ returned 7.87%. Palantir's stock outperformed both indices significantly. This indicates strong Wall Street confidence.
Source: tradingview.com
II. PLTR Stock Forecast: Outlook & Growth Opportunities
Palantir Technologies (PLTR) shows promising growth. Consensus EPS estimates for Q3 2024 are $0.09, with a 29.23% YoY increase. Analysts estimate EPS between $0.08 and $0.10. For Q4 2024, EPS is also expected at $0.09, reflecting 17.86% YoY growth. Revenue estimates for Q3 2024 are $704.13 million, a 26.15% increase YoY. Estimates range from $698.67 million to $724.10 million. Q4 2024 revenue is projected at $745.15 million, up 22.49% YoY.
Source: seekingalpha.com
Moreover, Palantir raises its full-year 2024 revenue guidance to $2.742 - $2.750 billion. US commercial revenue is expected to exceed $672 million, growing at least 47%. Adjusted income from operations is projected between $966 - $974 million. The company anticipates adjusted free cash flow of $800 million to $1 billion.
A. Segments with growth potential
Palantir's commercial segment has seen substantial growth. The U.S. commercial business reported a 70% year-over-year revenue increase (excluding strategic commercial contracts). This growth is largely driven by the adoption of the Artificial Intelligence Platform (AIP). Significant deals have been signed with existing customers like Tampa General and Panasonic Energy of North America. These customers expanded their engagements to leverage AIP in various operations.
Source: Q2 2024 Presentation
Additionally, Palantir's government segment continues to be robust. The company secured several notable contracts, including a $153 million initial order from the Department of Defense.
This contract supports AI-enabled operating systems across combatant commands and the joint staff. Palantir's software is critical to national defense, further cementing its role in the government sector.
Source: precedenceresearch.com
As per precedenceresearch.com, the global data analytics market revenue may hit $50 billion in 2024 and may reach $400 billion by 2032 at a projected CAGR of 29.4% (2023 to 2032). Similarly, As per Gartner the AI software market revenue will hit $300 billion by 2027 at an annual rate of 19.1%.
Source: Gartner.com
B. Expansions and strategic initiatives
Research and Development Investments
R&D is a cornerstone of Palantir's growth strategy. The company has made significant investments in developing AIP and Apollo, which streamline AI deployment and management. Palantir's R&D efforts also focus on ontology and compute modules, enabling sophisticated applications in both commercial and government sectors. These innovations help in integrating customers' containerized applications into operational workflows that boosts the company's client base and top-line.
Source: Q2 2024 Presentation
Partnerships and Collaborations
Palantir has forged massive and critical partnerships to derive growth. The company collaborates with entities like Eaton and Kinder Morgan to modernize ERP deployments and optimize storage and pipeline monitoring, respectively. These collaborations leverage Palantir's AI capabilities to deliver tangible business outcomes.
Furthermore, Palantir's work with the Department of Defense showcases its ability to handle complex, mission-critical projects. The Open DAGIR initiative, worth $33 million, allows defense tech companies and government developers to build applications on Palantir's platform. This initiative is pivotal in expanding Palantir's footprint in the defense sector.
III. Palantir Stock Forecast 2024
A. Palantir Stock Prediction: Technical Analysis
Palantir Technologies Inc. (PLTR) currently trades at $26.32. The modified exponential moving averages set the trendline at $23.86 and the baseline at $23.63. These averages help gauge the stock's momentum and trend direction.
The average PLTR price target by the end of 2024 is $32.50. This target derives from the momentum of change-in-polarity over mid- to short-term periods. Analysts project this over Fibonacci retracement and extension levels. The optimistic Palantir price target stands at $40.00, driven by upward price momentum in the current swing. Conversely, the pessimistic PLTR target price is $27.00, based on potential downward price momentum in the same timeframe.
Key resistance levels for Palantir include the primary resistance at $26.96. The pivot point of the current horizontal price channel is $24.27. In case of heightened volatility, resistance can peak at $40.37. Core resistance is marked at $32.77. On the support side, the stock finds support at $21.92 and core support at $15.77.
Source: tradingview.com
The Relative Strength Index (RSI) for Palantir is 57.76, which signals a neutral stance. Regular bullish and bearish levels are at 46 and 75, respectively. Currently, there is no bullish or bearish divergence. The RSI line trend is upward, indicating strengthening momentum.
The Moving Average Convergence/Divergence (MACD) indicator shows a bullish trend. The MACD line is at 1.59, the signal line is at 1.45, and the histogram stands at 0.13. However, the strength of this bullish trend is decreasing, suggesting caution.
Source: tradingview.com
The Price Volume Trend (PVT) indicator also points to a bullish momentum. The PVT line is at 1.32 billion, and the moving average is at 1.05 billion. This indicates a positive volume trend supporting price increases.
Source: tradingview.com
In terms of volume, the moving average of up volume is 14.75 million, while the down volume is -11.09 million. The volume delta, calculated as 3.66 million, supports a bullish volume momentum. This suggests more buying interest than selling pressure.
Source: tradingview.com
B. PLTR Forecast: Fundamental Analysis
Palantir stock's forward P/E ratio stands at 74.84, significantly higher than the sector median of 22.3. This marks a 235.68% difference, highlighting PLTR's premium valuation. Historically, PLTR's five-year average P/E was 120.52, showing a 37.90% decrease. The PEG ratio, at 3.11, surpasses the sector median of 1.76 by 76.58%, indicating potential overvaluation relative to growth. The forward EV/Sales ratio is 20.25, which is 669.38% higher than the sector's 2.63. This suggests high market expectations for future revenue. PLTR's forward EV/EBITDA ratio is 55.67, compared to the sector's 13.51, a 311.99% difference. Similarly, the EV/EBIT ratio at 58.53 exceeds the sector's 18.74 by 212.31%. The forward Price/Sales ratio is 21.57, much higher than the sector median of 2.71, a 695.58% difference. The forward Price/Book ratio is 13.41, against the sector's 3.79, a 253.56% difference. Finally, the forward Price/Cash Flow ratio stands at 68, compared to the sector median of 21.21, indicating a 220.65% premium. These metrics collectively suggest that PLTR trades at a significant premium, reflecting high growth expectations.
Source: Analyst's compilation
C. PLTR Stock Prediction: Market Sentiment
Market sentiment towards Palantir Technologies is divided. According to CNN.com, analysts have varied opinions. 39% rate it as a buy, 26% hold, and 35% sell. The one-year stock price forecast shows a high of $38.00 and a low of $9.00. The median PLTR stock price target is $26.00, close to the current price of $26.32. This indicates mixed confidence in future performance. According to WSJ.com, recent months have seen a slight increase in buy ratings. Current buy ratings stand at six, up from three three months ago. Hold ratings have decreased to six, indicating a shift in sentiment. Sell ratings have increased to seven, suggesting growing skepticism.
Source:CNN.com
Source:WSJ.com
PLTR Institutional Holdings
Institutional investors hold 41.28% of Palantir's outstanding shares. This represents significant institutional interest and confidence. Total shares outstanding are 2,130 million, with institutional holdings valued at $23,147 million. High institutional ownership can indicate stability and confidence.
Source: WSJ.com
PLTR Short Interest
Short interest in Palantir Technologies is notable. Benzinga.com reports 81.12 million shares shorted, representing 4.10% of total shares. Days to cover is 1.9, indicating how quickly short positions could be covered. High short interest can signal skepticism about the stock's future performance. It also suggests potential for a short squeeze, which could drive up the stock price if shorts are forced to cover.
Source: Benzinga.com
IV. PLTR Stock Forecast: Challenges & Risk Factors
Palantir Technologies holds 1.69% (as per 6sense.com) market share in the global Big Data Analytics market and faces notable challenges from competitors in the Analytics sector. Companies like Snowflake, IBM, and Microsoft Azure pose significant threats. Snowflake offers cloud data warehousing, which directly competes with Palantir's data integration capabilities. IBM's analytics solutions, such as Watson, are well-regarded in the industry. Microsoft Azure provides robust analytics tools, leveraging its vast cloud infrastructure. To be product specific, Databricks, Azure, and Apache Hadoop lead with significant market shares. Databricks holds 15.95%, Azure Databricks 15.08%, and Apache Hadoop 14.53%. They also have extensive customer bases, which they leverage for cross-selling analytics solutions.
Source: 6sense.com
Other Risks
Economic downturns pose a significant risk to Palantir. Budget cuts can lead to reduced spending on data analytics. This directly impacts Palantir's revenue, especially from government contracts. Also, Stock-Based Compensation is boosted 55% year-over-year that will directly impact the equity value through increasing dilution.
Source: Q2 2024 Presentation
In conclusion, Palantir Technologies (PLTR) demonstrates robust performance, with solid top- and bottom-line growth. Major contracts and high growth in U.S. commercial revenue highlight its expanding market presence. Analysts forecast continued growth, with growing EPS estimates. Despite a promising outlook, Palantir faces competition from Snowflake, IBM, and Microsoft Azure. For PLTR stock, technical outlook is positive with targets ranging $40-$27 for 2024. For traders, CFDs on PLTR stock can be accessed through the VSTAR trading app, regulated by ASIC. VSTAR offers institutional level experience, competitive trading fees and a wide range of markets.
