"We have a good chance at becoming the most important software company in the world," Palantir (PLTR 8.06%) chief executive officer Alex Karp said during an interview with Bloomberg on Aug. 7.
Karp clearly doesn't lack confidence. But he has good reasons to be excited about the cloud data leader's expansion potential. Karp says there's "an infinite market" for Palantir's artificial intelligence (AI) solutions -- and he intends to position the company to lead the AI arms race.
Here are some more reasons why you may want to consider buying Palantir's shares today.
1. CEO Alex Karp has an audacious strategy
Karp is far from the typical staid chief executive. He's not afraid to boast about the merits of Palantir's technology or issue bold growth targets. Although that can put off some people, Karp has made clear his intentions to investors. "Our strategy on AI is to just take the whole market," Karp said during the company's first-quarter earnings call in May.
That's a striking statement, particularly when considering the potential size of the AI market and the formidable competitors battling to claim their piece of the pie. Yet Karp might get closer to achieving his daring goals than many skeptics currently believe.
Wedbush analyst Dan Ives views Palantir as the "the Messi of AI." He's referring to Lionel Messi, who's widely viewed as the best soccer player in the world. "We believe Palantir has built an AI fortress that is unmatched and poised to be a major player in this AI Revolution over the next decade," Ives said on July 28.
Ives expects Palantir to capture a sizable share of an AI application market that could eventually grow to $800 billion. In turn, he sees Palantir's share price surging more than 70% to $25.
2. Customers are flocking to Palantir's AI offerings
Palantir is enjoying unprecedented interest in its new AI platform, known as AIP. The platform offers access to the company's highly regarded machine learning capabilities, commercial and open-source large language models, and industry-leading risk controls. AIP is designed to help governments and businesses harness the power of AI to improve their decision-making processes.
The U.S. military and other government organizations are partnering with Palantir to strengthen their informational and analytical advantages over their rivals. In June, Palantir was awarded a multiyear contract from the U.S. Special Operations Command that could be worth up to $463 million.
"The ability of free and democratic societies to prevail requires something more than moral appeal," Karp wrote in a guest essay published by The New York Times on July 25. "It requires hard power, and hard power in this century will be built on software."
Companies, meanwhile, are turning to Palantir to glean AI-derived insights from their ever-growing hordes of data. For instance, pharmaceutical giant Novartis partnered with Palantir to create a data lake -- a centralized repository that stores and protects large amounts of data from a large variety of sources, making the information easier to process and analyze -- it believes will accelerate its drug development efforts.
All told, Palantir's customer count jumped 38% year over year to 421 in the second quarter. Its revenue, in turn, increased 13% to $533 million. Better still, Palantir's billings -- an important growth metric that combines revenue with contracts for services that have not yet been fulfilled -- soared 52% to $603 million.
3. Palantir's robust cash flow is enabling capital returns to shareowners
Moreover, unlike many early-stage AI companies, Palantir is already profitable. It delivered an operating profit of $10 million in the second quarter.
Palantir's software-based business model also produces hefty cash flow, including $285 million in adjusted free cash flow in just the first half of 2023. Combined with its balance sheet strength -- Palantir ended the second quarter with $3.1 billion in cash and investments -- this strong cash generation prompted the company to initiate a stock buyback program of up to $1 billion.
Investors could also rightly view the share repurchase authorization as an indication of management's confidence in Palantir's growth prospects. "The scale of the opportunity that lies ahead has increased significantly in recent months," Karp said in his second-quarter letter to shareholders. "And we intend to capture it."
