Palantir (PLTR -0.23%) CEO Alex Karp has not spoken kindly of the metaverse. Karp described the virtual reality world as an "idiosyncratic pursuit" of the "technocratic elite." He feels it distracts from a company's emphasis on resolving issues in the "real world."
However, Palantir's efforts to solve existing problems often involve running simulations. Interestingly, efforts to improve its analytics abilities may inadvertently bring it into the metaverse.
What is Palantir?
To understand any possible link to the metaverse, one has to understand what Palantir does and how it differentiates itself. Analysts tend to categorize it as a "big data" and artificial intelligence (AI) company. Thus, analysts may associate it with businesses such as Alteryx or Snowflake.
Yet Palantir provides digital infrastructure geared toward data-driven operations and decision-making. It describes itself as a software, not a data, company. Its ultimate goal is to analyze data and deliver insights, something neither of the aforementioned companies does.
It handles this through its Apollo software, which manages and supports the Gotham and Foundry operating systems. Gotham works in the national defense and law enforcement realms, while Foundry seeks to deliver observations into the business world.
Governments and businesses seem to highly value that analysis. Admittedly, at $1 million per month, Foundry's insights do not come cheap. Nonetheless, its U.S. commercial customer counts rose 124% yearly in the third quarter of 2022, strongly indicating its insights continue to deliver value.
Why Palantir may rely on the metaverse
Indeed, seeing Palantir as a metaverse stock means a reimagining of the metaverse concept. The Oxford English Dictionary defines the metaverse as "a virtual-reality space in which users can interact with a computer-generated environment and other users.."
As conditions stand now, Palantir's "metaverse," such as it is, does not build graphic representations. Its users are not likely to put on a VR headset and interact in a fantasy world. This makes Karp technically correct about Gotham and Foundry not being the metaverse.
Still, Palantir is a leader in artificial intelligence and machine learning (ML). Advisory firm Forrester named Palantir a leader in the AI and ML industry due to its research. Since metaverse developers frequently apply these technologies, the company could be taken into that virtual world.
Additionally, the metaverse goes well beyond fantasy. For example, the Pentagon may have to evaluate potential real-world occurrences and determine the proper response to such scenarios. Since Palantir strives to apply data to run simulations and make a conclusion, it may need to interpret significant amounts of data, bringing its software into the metaverse.
Do the financials point to a buying opportunity?
Regardless of whether Palantir is or can become a "metaverse stock," investors also need to evaluate whether the stock itself is a buy. In that regard, its financials point to both hope and disappointment.
Its revenue for the first nine months of 2022 surged 26% higher versus the same period in 2021, to $1.4 billion. Hence, growth remains robust amid economic uncertainty, though it is slower than the 44% year-over-year growth rate in the first nine months of 2021.
Moreover, like many growth companies, Palantir consistently books losses, losing $405 million in the first three quarters of 2022. That was slightly more than the $364 million it lost during the same period last year as operating and investment losses weighed on the business. Also, after the continuing losses and a brutal bear market in tech, the SaaS stock has fallen by about 80% from its January 2021 high.
Still, its price-to-sales (P/S) ratio of 8 is just above all-time lows. Also, Palantir's AI and ML research leadership means that developers could apply its technology not just to the metaverse but to other areas of technology as well.
Those factors may indicate that investors who can tolerate some risk should consider buying Palantir stock hand over fist. In the end, it also benefits from not having a true competitor. This should bode well for Palantir and its potential role in the "metaverse," even if the company chooses to avoid that description.
