Palantir Technologies (PLTR 3.73%) is experiencing terrific growth due to the emerging popularity of artificial intelligence (AI). Demand is on the rise as company has a plethora of opportunities out there for it to pursue.
There is a lot of potential for the business in the long run, but one area that doesn't get much hype is healthcare. And that's something that investors should be careful not to overlook.
Palantir can help hospitals while keeping data secure
Hospitals aren't known for being tech-savvy, and there's room to improve many of their processes. This is where Palantir's data analytics capabilities can come into play to help streamline workflows. The company has been working with hospitals, and the opportunity is there for it to provide some significant, long-term value in improving its operations.
A big challenge in the healthcare industry is trust and ensuring that patient information is adequately protected and safeguarded. And with Palantir being a trusted company that governments around the world rely on, it has already demonstrated its reliability, making it a safer tech company for hospitals to work with than most.
Healthcare is a small slice of Palantir's U.S. business
Currently, Palantir's hospital operations platform isn't making much of an impact on the overall business; it makes up only 10% of the company's U.S. commercial revenue. But with the country spending more than $4 trillion on healthcare annually, this can be a significant growth opportunity for the company in the future, and it's one that investors may be underestimating and overlooking.
Improving processes can help hospitals move away from spreadsheets and whiteboards while also having easier ways to schedule and manage workloads. At the Cleveland Clinic, for example, Palantir's software used AI to help predict discharges, enabling the hospital to efficiently plan and ensure there was enough space as patients came in and out of the hospital.
Palantir has a virtual command center that hospitals can use to plan schedules and manage workflows to balance loads and reduce wait times. Since it uses AI and machine learning, it can give hospitals more visibility into what their operations may look like in the future rather than just looking back at what has already happened.
Palantir is in the running for a major European contract
Right now, Palantir's hospital-related revenue is modest, and there is barely a mention of healthcare or hospitals on its quarterly filings. It's not an area that generates much excitement, but that can change as the company starts to bring on larger and more noteworthy clients. One particularly large contract it is working on involves England's National Health Service (NHS).
Palantir is hoping to help revolutionize the NHS England's operations through its software. It is in talks about a seven-year contract worth approximately $590 million. If Palantir wins the bid, it would be responsible for updating and enhancing the NHS England's outpatient data system. It may be as early as this month that a winning bid is announced.
Healthcare could revitalize Palantir's revenue growth
In the company's most recent quarterly results, Palantir reported revenue of $533.3 million, which was a year-over-year increase of 13%. This year, it projects its top line to reach at least $2.2 billion, up from $1.9 billion in 2022.
The launch of its AI platform should help accelerate Palantir's growth rate, but growing its presence in healthcare can lead to even more promising results for the business in the long run. If it can win the NHS England contract, that may encourage more healthcare systems and hospitals to consider Palantir's software.
In recent quarters, Palantir's top line has been increasing but at a decreasing rate.
PLTR Revenue (Quarterly YOY Growth) data by YCharts.
Is Palantir stock a buy?
Palantir has been a scorching-hot buy in 2023 due to the excitement in AI and the company's potential opportunities there. Year to date, the stock is up more than 145%.
And now, with the business expecting consistent profits, its operations look more stable and reliable as well. Palantir's stock trades at a price-to-earnings-growth, or PEG, ratio of around 1, indicating that based on analyst growth projections, the stock could be a steal of a deal for long-term investors willing to hang on to the investment for multiple years.
Although the stock may seem expensive right now, trading at around 60 times its estimated future profits, it's not too late to buy shares of Palantir as its sales and profits could rise drastically in the years ahead.
