Palantir’s Perfect 10: Blowout Earnings Spark a New Bull Case

Key Points

• Palantir posted blowout results and raised guidance, extending a decade of accelerating revenue growth.
• U.S. commercial demand is surging, with record contract value and a fast-growing customer base.
• Analysts lifted targets despite valuation concerns, and the pullback into support looks potentially buyable.

Just in time for the upcoming Winter Olympic Games, Palantir Technologies Inc. NASDAQ: PLTR delivered an earnings report that would be considered a gold medal performance. Palantir delivered a perfect 10, as in 10 consecutive years of accelerating revenue growth.

Continuing the perfect 10 theme, PLTR stock jumped by more than 10% when the market opened the day after the report. The stock was up even more than that in the premarket. The stock has pulled back some as of this writing, but the blowout report was exactly what retail investors needed to see after the stock had dropped over 22% in the last three months.

Specific to the current quarter, Palantir delivered record revenue of $1.40 billion, up 70% year-over-year (YOY). The company’s full-year revenue of $4.47 billion was 56% higher YOY. That growth is still largely driven by the United States.

However, building on a theme that’s been emerging for the past year, U.S. commercial revenue was up 137% YOY. That included a record $4.3 billion in total contract value, signaling strong future demand.

Palantir’s Rule of 40 score (the sum of revenue growth and operating margin) came in at an almost absurd 127, and the company guided for revenue in the next 12 months to come in at $7.19 billion (a gain of 61% YOY).

Palantir Doesn’t Power AI, It Puts AI to Work

On the heels of reports from technology stocks like Microsoft Corp. NASDAQ: MSFT and Meta Platforms NASDAQ: META, Palantir’s report is further affirmation that the artificial intelligence (AI) trade is alive and well. More importantly, unlike the hyperscalers, Palantir is addressing AI at a higher level in the AI stack.

Palantir’s focus is not on building the underlying infrastructure, but on delivering software that helps enterprises and governments operationalize AI in real-world decision-making. That positioning allows the company to capture value from AI adoption regardless of which cloud provider or chipmaker ultimately dominates the lower layers of the stack, giving its growth story a different, and potentially more durable, profile than the hyperscalers.

Commercial Business Continues to Close the Gap

Palantir is frequently linked with its business with the U.S. government. That can be bullish or bearish for the company, depending on what side of the political aisle investors sit on.

However, regardless of ideology, investors should expect growth from the government side of the business. The U.S. government is increasing the Department of Defense (DoD) budget in the coming years to modernize the military. Palantir will play a key role in that transition.  

However, looking at Palantir only through the government lens leaves an incomplete picture. The company’s commercial business has been growing strongly in the past year.  In the quarter, Palantir closed 180 deals of at least $1 million, 84 deals of at least $5 million, and 61 deals of at least $10 million.

Specific to the commercial business, Palantir saw an 8% quarterly increase in its commercial customer count, and it increased its commercial customer count by 49% YOY.

The bottom line for investors is that the company is now generating about 48% of its revenue from the commercial side of its business.

Analysts Continue to Raise the Floor on PLTR Stock

The Palantir analyst forecasts on MarketBeat show a mostly bullish reaction to the company's report. Robert Baird and Northland Securities upgraded PLTR stock. Dan Ives of Wedbush, one of the most prominent Palantir bulls, reiterated a Buy rating on Palantir with a price target of $230.

Of particular interest is that Palantir’s consensus price target is now $193.91. That’s a 22% gain from the stock’s price as of this writing. It’s also 12.5% higher than the consensus target just one month ago.

This is a key reason why retail investors have to make sure they watch what analysts are doing more than what they may be saying.

PLTR Stock Looks Buyable Despite Valuation Concerns

The valuation concerns surrounding PLTR stock are well-documented and are not going away. But with analysts raising their price target, and the stock looking oversold, this could be a buyable point.

As of this writing, PLTR stock is pulling back into a key support zone that has acted as support at two different points in the last year. It also aligns with the stock’s 200-day simple moving average (SMA).

If buyers step in, a reflex rally could push to around $170, which would align with the 20-day SMA, though that moving average is likely to act as initial resistance rather than a foregone upside objective.