Palantir Technologies shares rose in early trading on Friday after a top Wall Street analyst renewed his price target for the group following its strong second-quarter earnings report and a key partnership to expand its flagship artificial intelligence platform.
Palantir (PLTR) which on Aug. 5 raised its annual profit forecast for the second time this year, is one of the few Wall Street stocks that was unaffected by the broader market volatility triggered by leveraged currency trades earlier this week.
The data analytics group posted record quarterly earnings of 6 cents per share for the three months ended in June, with sales up 27% to $678 million. The report was driven in part by rising demand for its AIP Logic platform, which tests and improves ai-related strategies.
A big jump in commercial division sales, which rose 55%, also suggests that Palantir is having success in expanding its overall business beyond its traditional list of government clients.
“The performance tells us that Palantir's value proposition for ai and generative ai solutions continues to resonate with customers despite a crowded and opaque market landscape,” said Third Bridge analyst Jordan Berger.
Palantir and Microsoft join forces
“We've heard from experts that reducing the size of Palantir's initial Foundry platform deployment could significantly expand the company's addressable market, and the introduction of AIP and the Bootcamp sales model appear to be successfully facilitating that transition,” he added.
The Denver-based data analytics group also forecast full-year sales of about $2.75 billion, a modest increase from its previous forecast, with adjusted operating profit in the region of $966 million to $974 million.
Related: Analyst resets Palantir stock price target ahead of Q2 earnings
That forecast, in fact, came just days before the group unveiled a new partnership with Microsoft. (MSFT) which will see the Redmond, Washington-based tech giant integrate Palantir products into Azure cloud services for government customers.
Palantir will also adopt Azure’s OpenAI, with the ability to deploy it in classified environments among its growing base of government and intelligence community customers.
“With this agreement solidified and Microsoft leveraging Palantir's ai and (wide language model) capabilities for the U.S. government, the company can now increase the pace of ai deployment as Palantir continues to accelerate AIP adoption within the federal sector,” said Wedbush analyst Dan Ives.
“We think this will be a launching pad for the Palantir AIP story to reach the (Department of Defense) and the broader Beltway ecosystem over the next 12 to 18 months,” he added.
Growing commercial business
Ives has an Outperform rating and a $38 price target on Palantir shares.
Citigroup analyst Tyler Radke, who raised his price target on Palantir by $2 to $30 a share, said government contracts were a key driver of its second-quarter earnings.
“The results show that Palantir's approach, potentially aided by AIP, is able to tap into emerging ai spending pools with record net additions of large eight-figure customers and a 15-point reacceleration in the US commercial market that helped offset weaker international market performance,” Radke and his team wrote.
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“We are impressed by the fiscal second quarter results, but see limited future returns at the highest valuation in software, with a (next 12 months) revenue multiple of 19x and (enterprise value to free cash flow) of approximately 60x with continued government irregularity,” he added.
Palantir shares rose 1.95% in premarket trading to indicate an opening price of $29.85 each, a move that would extend the stock's year-to-date gain to about 74%.
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