Palantir stock pops 20% and continues to silence skeptics

Palantir Technologies Inc. NYSE: PLTR stock is up 20% in after-hours and pre-market trading after a strong earnings report. The company reported after the closing bell on February 5 and delivered several highlights.  

The company delivered earnings per share (EPS) of eight cents on revenue of $608 million. The EPS was in line with analysts' estimates, and revenue exceeded the $603 million forecast. It was also a 20% year-over-year (YOY) increase. The company's operating margins jumped from 29% to 34%.  

What seems to have investors particularly excited is the company's forward guidance. For example, the company is guiding for $2.65 to $2.66 billion in full-year revenue for 2024. The midpoint of that guidance would be another 20% YOY gain.  

Furthermore, the company expects to generate adjusted free cash flow between $800 million and $1 billion. To put that into perspective, the company generated $305 million in adjusted free cash flow in the current quarter. Its cash balance increased to $3.7 billion from $3.3 billion in the previous quarter. 

More of the same for Palantir 

Palantir critics continually look at the company with a "yeah, but" attitude that is becoming common among artificial intelligence stocks. When the company went public via a direct listing in 2020, almost 100% of the company's revenue was from government contracts. That led to cries of yeah, but what about commercial growth?  

The company has been steadily growing its commercial business, but this quarter took it to an entirely new level. Palantir increased its commercial revenue by 70% year-over-year and is guiding for 40% growth in its commercial sector this year.  

The reason for that growth comes, in large part, from the company's artificial intelligence (AI) platform, AIP. The company's go-to-market strategy for its AIP platform is a series of AI bootcamps that the company says can move customers "from 0 to use case in 5 days." In the company's earnings presentation it reported that over 465 organizations have taken part in the bootcamps.  

But that leads skeptics to wonder how Palantir will go to market with its government clients when bootcamps become impractical. Palantir acknowledged that this process will be slower, but it's well underway. And the company has a significant first-mover advantage in this space.  

Is PLTR stock a buy or hold? 

From a strictly technical standpoint, PLTR stock has been here before. In November 2023, the stock shot to a 52-week high after earnings. The same price action occurred after the company's earnings report in August.  

In both cases, the stock pulled back shortly thereafter. And the relative strength indicator for PLTR stock is around 71 which suggests the stock is now overbought.  

However, each time Palantir stock has pulled back, it's resulted in a higher low for the stock.  

That would argue for a Hold and to wait to see where the price settles. It's also important to note that the company's 20% YOY growth is impressive but perhaps not enough to justify the current surge in the stock price.  

However, will the third time be the charm for Palantir shareholders? While a slight pullback is likely, analyst sentiment is clearly changing. Since the company released earnings, the Palantir analyst ratings on MarketBeat show that Citigroup Inc. NYSE: C and Jefferies have upgraded PLTR. Raymond James reiterated its Outperform rating while raising its price target from $22 to $25.