Few companies are more committed to using artificial intelligence (AI) than Palantir (PLTR 1.62%). AI has been involved in every Palantir offering since its inception and is one of the few companies whose product is built from the ground up to utilize AI.
Its latest results were also solid, which begs the question: "Is Palantir the best AI stock right now?" Read on to find out.
A vital software for governments and businesses alike
Palantir's platform is designed to take vast amount of information, run it through its AI models, and derive actionable insights. Users can also run simulations to understand what might happen if they tweaked something in the operating flow -- a vital piece of information for any client trying to improve themselves.
Although Palantir has products for mainstream business, it didn't start that way. Initially, its products were solely developed for use by government agencies worldwide, and that portion of its business still makes up the majority of revenue (55% in Q1). This is a key customer base, as multiple governments, including the United Kingdom and several departments within the U.S. government, like the Department of Defense and State Department, utilize Palantir's products and have integrated Palantir's systems deeply enough that it would be challenging to drop Palantir.
This cohort isn't stodgy either; government revenue rose 20% in Q1, while U.S. spending rose even faster at 22% year over year. Compared to commercial revenue, which only rose 15% in Q1 (U.S. commercial revenue grew 26% in Q1), the government business remains a vital piece of the puzzle for Palantir.
But Palantir recently announced a new product that could be a game-changer for government and commercial customers alike.
A business focussed chatbot
In its earnings call, CEO Alex Karp discussed its artificial intelligence platform (AIP), a product he stated: "the demand for of which is nothing I've ever seen in 20 years of being involved in Palantir."
AIP is Palantir's take on the ever-popular generative chatbot but focuses on telling its users what they should do in a particular situation. To power this generative bot, Palantir uses the data its customers already have in their system, making the rollout smooth. For example, Palantir rolled out a pre-release version of AIP in a few days for a "major insurance company" to automate claims processing.
That's high expectations for a segment, but with solid demand already appearing, Palantir may have stumbled onto a product line with game-changing potential.
But are the finances good enough for Palantir to be a viable investment?
Palantir is becoming more profitable
Palantir is currently turning the profitability corner and succeeded again in Q1 by posting a second-consecutive quarter of $0.01 per share earnings. While that's not a massive figure, it shows Palantir's commitment to its goal, and investors should applaud that.
Looking forward to the rest of 2023, Palantir bumped its revenue guidance up by $5 million to between $2,185 million and $2,230 million compared to the guidance it gave at the beginning of the year. But what was impressive was its guidance change from GAAP net income for the entire year to GAAP net income every quarter. This shows management is confident in its efficiency strategies, an excellent sign for investors.
All of this fantastic news sent Palantir shares up 23% following its earnings release. But even with this jump, Palantir's stock looks reasonable, even for a software stock.
PLTR PS Ratio data by YCharts
45 times forward earnings isn't bad for a company that's still improving its margins, and 10 times sales is exactly what you'd expect to pay for a well-executing software stock. Because of its valuation and potential for upside, Palantir looks like a great stock to buy here and is an excellent way to invest in the AI revolution.
