In recent weeks and months, investors have gradually started to turn their backs on traditional defense and aerospace stocks like Raytheon (RTX), Boeing (BA), and Lockheed Martin (LMT) in favor of newer, tech-focused defense companies. This follows trends in government spending, and has greatly benefited Palantir (PLTR).
Touted as the “Messi of AI” by celebrated Wedbush analyst Dan Ives, Palantir has been a retail investing darling.
In just under five years, shares of the company have generated mammoth returns of more than 1,600%, with the stock already more than doubling this year.
www.barchart.com
Founded in 2003, Palanir is a software company that builds advanced data platforms to help organizations make better, faster decisions using data integration, artificial intelligence, and machine learning. It helps governments and businesses integrate vast, messy datasets from different sources, visualize and analyze data in real-time, use AI/ML to make forecasts, detect patterns, and recommend actions.
Currently valued at a market cap of $365.5 billion, Palantir is set to report its Q2 2025 results on Aug. 4. So, should it be a part of your portfolio? I believe so, and here’s why.
Since my last coverage on Palantir, the stock is up 19%. Here is what is driving the stock higher:
Palantir’s Artificial Intelligence Platform (AIP) has played a significant role in the company’s recent commercial expansion. Central to this strategy is the bootcamp model, which permits prospective clients to test the platform without requiring advanced technical expertise.
As of Q1 2024, 915 organizations had completed one of these bootcamps with a considerable portion having transitioned to production deployment, exceeding industry adoption benchmarks. It is reasonable to assume that a comparable amount of organizations has completed bootcamps since.
The government segment also remains key for Palantir. A $795 million contract modification from the U.S. Army for the Maven Smart System marked Palantir’s first agreement of this scale. The company is also engaged in positioning itself for longer-term strategic programs, including the proposed “Golden Dome” missile defense system.
And on the commercial side, Palantir recently announced a partnership with The Nuclear Company to create a Nuclear Operating System (NOS). It aims to address systemic challenges in new nuclear infrastructure, including cost overruns and schedule delays. Other recent agreements include work with Fedrigoni, an Italian paper manufacturer, and Tomorrow.io, a weather intelligence company.
However, the stock continues to trade at valuations that have resulted in some analysts to question the company’s immediate prospects. The stock is trading at a forward price-earnings ratio above 400x and a price-sales ratio of 127x, both much higher than sector medians. And although the company has made great progress to diversify its business into the commercial sector, it is still very dependent on the U.S. government.
As we get ready to analyze Q2 results, let’s recap Q1.
Revenues for the quarter were at $884 million, up 39% from the previous year. Growth was primarily driven by its U.S. operations, with U.S. commercial revenue coming in at $255 million (+71% YOY) and U.S. government revenue at $373 million (+45% YOY). Earnings went up to $0.13 per share from $0.08 per share in the year-ago period.
Key operating metrics such as customer count (+39% YOY), and U.S. commercial total contract value ($810 million, +183% YOY) also witnessed significant growth from the year-ago period. Overall, Palantir bagged 139 deals of at least $1 million, 51 deals of at least $5 million, and 31 deals of at least $10 million in Q1 2025.
Cash flow from operations also grew at a healthy tick of 139.4% on a yearly basis to $310 million as adjusted free cash flow doubled as well to $370 million.
For Q2 2025, Palantir expects revenues to be in the range of $934 billion to $938 million. Overall, analysts are expecting Palantir to report EPS of $0.08, a rise of 166.7% from the previous year.
Overall, analysts have attributed a rating of “Hold” for the stock, with a mean target price of $107.23, which has already been surpassed. In fact, the high target price of $160 is also roughly in line with its current price. Out of 20 analysts covering the stock, three have a “Strong Buy” rating, 13 have a “Hold” rating, one has a “Moderate Sell” rating, and three have a “Strong Sell” rating.
www.barchart.com
On the date of publication, Pathikrit Bose did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. This article was originally published on Barchart.com
