Palantir stock price has surged to a record high as investors move back to artificial intelligence companies. PLTR jumped to a high of $139.77 on Wednesday, up by 110% from its lowest point in April. This surge has brought its market capitalization to over $321 billion, making it one of the biggest companies in the US.
Why Palantir stock price has surged
Palantir share price has jumped because of its growing business and market share in the artificial intelligence industry.
Its annual results show that its business has been in a strong bull run in the past few months.
Data shows that its annual revenue has jumped from $1.09 billion in 2020 to $2.8 billion last year.
It has also moved from being a loss-making company into a highly profitable one, making over $579 million in trailing twelve-month (TTM) profit.
The most recent results showed that Palantir Technologies’ business is firing on all cylinders, helped by its commercial and government business. Its US revenue rose by 55% in the last quarter and by 13% from the fourth quarter.
The numbers showed that US commercial revenue rose by 71% to $255 million, while the government revenue rose by 45% to $373 million. This means that the commercial division is closing the gap with the government one.
Including its international business, the company’s revenue jumped by 39% to over $884 million. This happened as the company closed 139 deals during the quarter, with most companies being interested in its artificial intelligence solutions. The CEO said:
“We are delivering the operating system for the modern enterprise in the era of AI. Consequently, we are raising our full-year guidance for total revenue growth to 36% and our guidance for U.S. commercial revenue growth to 68%.”
Rule of 40 shows PLTR stock is cheap
Analysts are optimistic that the company will continue growing. The average estimate is that its revenue will rise by 38% to $939 million. This will be followed by a 35% quarterly growth to $980 million.
Palantir is expected to make $3.9 billion in revenue this year, up from 35.9% from a year earlier. It will then make $5 billion next year, a 28% annualized growth. There are chances that the company’s business will beat analysts estimates this year.
A key issue about Palantir is that it is one of the most expensive companies in Wall Street. It has a forward price-to-earnings ratio of 228, much higher than the sector median of 22.80. Its forward EV to EBITDA ratio of 176 is higher than the sector median of 19.
While PE and EV to EBITDA multiples are important, analysts use the rule of 40 metric to value software companies. This approach looks at a company’s growth and its margins to estimate its valuation. Ideally, when the revenue growth and margin are added, the figure should be over 40.
In Palantir’s case, the company has a forward revenue growth figure of 31% and its net income and free cash flow margins of 18% and 29%, respectively. In this case, the rule of 40 is between 49% and 60%, meaning that it is not all that overvalued.
Read more: US picks Palantir as data analysis partner, but why you shouldn’t jump into PLTR
Palantir share price technical analysis
PLTR stock chart | Source: TradingView
The daily chart shows that the PLTR stock price has made a bullish breakout, moving above the key resistance level at $125.20. This was a notable level since it was the upper side of the cup and handle pattern.
The C&H pattern has a depth of 47%. Measuring the same distance from the cup’s upper side gives it a target of $184, which is about 35% above the current level. A drop below the support at $120 will invalidate the bullish outlook.
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