Palantir Technologies (NASDAQ:PLTR) delivered another superb earnings beat earlier this month, smashing revenue records with $1.18 billion in sales, closing 204 deals worth at least $1 million, and securing an adjusted operating income margin of 51%.
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The company shows no signs of slowing down, with a total contract value of $2.8 billion – an increase of 151% year-over-year. And yet, despite the stellar report, PLTR’s share price has sagged by double digits since the earnings call.
While some of the dropping share price can be chalked up to overall worries about an AI bubble percolating throughout the market, PLTR’s high valuations have been dogging the company as well.
While acknowledging PLTR’s “prohibitively expensive valuation,” top investor Harsh Chauhan believes the company’s growing customer base should be the real focus of attention.
“The company is now attracting new customers at a faster pace, and that’s one big reason to buy this high-flying stock right now,” explains the 5-star investor, who is among the top 1% of stock pros covered by TipRanks.
Chauhan notes that Palantir reported a 45% year-over-year increase in customers, a clear reflection of the company’s success supporting automation, efficiency, and removing redundancies. Commercial customers grew at an even faster clip, surging by 49% during the latest quarter.
Beyond new clientele, Palantir does an enviable job of upselling existing clients, points out the investor. On the earnings call, Palantir shared that multiple customers sought to increase their engagement with the company, with one medical device manufacturer signing a multiyear extension just five months after its initial contract.
Chauhan predicts that this ability will propel PLTR to even greater heights going forward, while also helping to improve the company’s margins.
“Palantir doesn’t need to spend any extra money to acquire new business from them, contributing toward positive unit economics,” adds Chauhan.
The investor notes that analysts are forecasting an earnings increase of greater than 30% next year, though even this could be understated. In other words, don’t count out Palantir’s ability to continue surprising on the upside.
“Palantir has shown that it has the ability to grow at a significantly faster pace, and that could give this AI stock additional fuel to fly higher,” concludes Chauhan. (To watch Harsh Chauhan’s track record, click here)
Wall Street is not quite as bullish, however. With 3 Buys, 11 Holds, and 2 Sells, PLTR carries a consensus Hold (i.e., Neutral) rating. Its 12-month average price target of $187.87 implies minimal movement going forward. (See PLTR stock forecast)
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Disclaimer: The opinions expressed in this article are solely those of the featured investor. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.