Is PLTR Stock A Buy? Here's What Technical, Fundamental Analysis Shows About Palantir Stock In May 2023

There’s plenty for bulls and bears to hash out over Palantir Technologies (PLTR). Bulls point to improved profitability for PLTR stock. Bears focus on decelerating revenue growth. Then there’s buzz over artificial intelligence stocks to consider.

Earnings for Palantir stock are due Aug. 7. Analysts expect PLTR stock to swing to a 5-cent profit from a 1-cent loss a year earlier. Revenue is expected to grow 12.6% to $533 million.

“With Q2 guidance implying an eighth consecutive quarter of flat to decelerating rev growth, comparisons start to get easier this quarter,” Jefferies analyst Brent Thill said in a recent note to clients.

“We believe that the U.S. commercial business segment needs to begin reaccelerating as the primary driver of top-line growth in the near-term. “

PLTR stock hit a 52-week intraday high on July 19 as AI stocks continued to rally. Palantir stock has jumped 161% in the first half of 2023.

Shares still trade well below the software maker’s all-time intraday high of 45 set in late January 2021.

PLTR Stock: Artificial Intelligence A Growth Driver?

PLTR stock bulls point to artificial intelligence software as a growth driver.

Palantir has already mined the AI opportunity with government customers for intelligence gathering, counterterrorism and military purposes.

Will generative AI spur growth in the commercial market for PLTR stock? The software maker has expanded into health care, energy and manufacturing.

In health care, Palantir customers possibly could use generative AI in applications such as drug discovery. Palantir announced its newest offering, the “Artificial Intelligence Platform,” earlier this year.

One Skeptic Doubts AI Credentials

At RBC Capital, analyst Rishi Jaluria holds an underperform rating on Palantir stock.

“Based on our checks, we don’t believe Palantir is truly a GenAI company,” Jaluria said in a note. “While (Chief Executive) Alex Karp may beat the drum on AI, especially in the media, our sense is AIP may be the same product Palantir has been selling, but with connectivity to LLMs (large language models).”

Jaluria added: “We expect GenAI to be a meaningful headwind to Palantir over time, especially given how powerful the technology is becoming, as well as reducing the need for the heavy customization Palantir is known for.”

Wedbush analyst Daniel Ives recently initiated coverage of Palantir stock with a buy rating.

“As we begin the 4th Industrial Revolution, Palantir is engaging in the widespread trend of various industries leveraging recent generative AI innovations to streamline operations and improve expense profiles,” Ives said in a note.

He added: “Given the company’s extensive experience handling customer data, PLTR’s transition to a pure-play AI name will leverage its existing expertise to drive advancements and deliver AI solutions powered by high-quality data.”

PLTR Stock: Governance Structure

Meanwhile, Palantir’s governance structure gives Karp and co-founder Peter Thiel long-term control of the company through super-voting rights.

The company name is derived from the palantiri, which are crystal ball-like “seeing stones” from the “Lord of the Rings” book and film series. Palantir means “one that sees from afar.”

In addition, Palantir engineers often customize software for the needs of customers. That extends the time needed to ramp up “digital transformation” projects. So after Palantir wins a contract it may take awhile to generate revenue.

The Denver-based company offers three platforms. One is Palantir Gotham, used primarily by government agencies. There’s Palantir Metropolis for banks, financial services firms and hedge funds. And Palantir Foundry is used by corporate clients.

Palantir gets nearly 60% of its revenue from government agencies. Decelerating revenue growth is an issue. In 2022, revenue growth slowed to 24% from 40% in 2021 and 47% in 2020.

In the first quarter of 2023, revenue rose 18% to $525 million. For the period ended March 31, government revenue rose 20% to $289 million, in line with estimates. Meanwhile, commercial revenue climbed 15% to $236 million, topping views for $217 million.

Profitability has improved for PLTR stock. In the fourth quarter of 2022, Palantir posted net income of $31 million using generally accepted accounting principles, or GAAP. It marked Palantir’s first quarter of positive GAAP net income. In the March quarter, it registered net income of $17 million.

Palantir Forges Partnerships

In November 2022 Palantir acquired full ownership of a joint venture in Japan that sells the company’s software. Japanese insurance firm Sompo Holdings is the biggest customer.

Then in 2023, Palantir began consolidating revenue from the joint venture in its earnings reports. A Morgan Stanley report estimates the venture had an annual revenue run-rate of $50 million heading into 2023.

Further, Palantir recently expanded its cloud computing partnership with Microsoft (MSFT) that targets government agencies.

To speed up corporate adoption of artificial intelligence software, Palantir and IBM formed a global partnership. Under the deal, Palantir made its Foundry software available to IBM’s cloud computing customers. The Foundry platform is a centralized data operating system that lets users manage, filter and visualize large data sets.

One issue for PLTR stock is that large U.S. government contracts are coming up for renewal, William Blair analyst Louie DiPalma said in a recent note.

Also, one wild card is whether Palantir will win more contracts in the United Kingdom from its National Health System. The NHS used Palantir during the coronavirus emergency. But a bigger contract worth 400 million euros, or roughly $426.6 million, is now up for grabs.

In addition, Palantir has gained traction in the health care market.

For example, Palantir now works with “four large organizations that represent nearly 10% of the entire U.S. hospital system, including Cleveland Clinic and Tampa General,” Goldman Sachs analyst Gabriela Borges noted in a recent report.

Meanwhile, Palantir has received considerable flak involving privacy issues amid its platforms’ use of facial recognition technology. The use of Palantir data analytics software is under scrutiny in Germany because of privacy concerns.

Palantir Stock Technical Analysis

Palantir stock’s Relative Strength Rating stands at 99 out of a best-possible 99. Also, PLTR stock holds an IBD Composite Rating of 99 out of a best-possible 99, according to IBD Stock Checkup.

Meanwhile, IBD’s Composite Rating combines five separate proprietary ratings into one easy-to-use rating. Also, the best growth stocks have a Composite Rating of 90 or better.

Further, PLTR stock has an Accumulation/Distribution Rating of A-minus. That rating analyzes price and volume changes in a stock over the past 13 weeks of trading. A+ signifies heavy institutional buying; E means heavy selling. Think of a C grade as neutral..