Last year was one to remember for Palantir Technologies (PLTR 3.73%). Shares of the software builder for the intelligence community more than doubled, soaring 167% in 2023.
After declining in each of its first two years as a public company, Palantir finally paid off for its shareholders. Can it keep beating the market in 2024? Let's go over some of the reasons the hot stock might be able to double again in the year ahead.
1. Revenue growth should accelerate
Revenue at Palantir has decelerated for three consecutive years, including last year, despite shares more than doubling. Decelerating growth isn't a death sentence, especially when a company is posting high top-line gains that are seemingly unsustainable. It doesn't mean the market won't celebrate when the trend turns positive.
Palantir went public in late 2020. Here is how revenue has clocked in so far.
- 2020: 47%
- 2021: 41%
- 2022: 24%
- 2023: 16% through the first three quarters
Revenue growth has been in the teens for the last four quarters. There are worse things than consistent double-digit growth, and things should get slightly better this year. Analysts see revenue rising 20% in 2024.
Image source: Getty Images.
2. Commercial growth is starting to move the needle
Palantir hit the market largely as a specialist in big-data business intelligence software solutions for the public sector. Government agencies and organizations would turn to Palantir to translate the data they were collecting into actionable information. Palantir still excels on that front, but it's growing even faster in the private sector.
Palantir has delivered $403 million in U.S. commercial revenue over the past four quarters, a 23% increase from where it was a year ago. This represents just 19% of the revenue mix at Palantir, but it's growing a lot faster than the overall business with its 16% ascent over the trailing 12 months. Momentum is actually improving, as commercial revenue soared 33% in its latest report, a big reason for total revenue accelerating sequentially in the third quarter.
The company's wingspan keeps growing. This week alone it struck a partnership with the University of Colorado's medical campus to boost the school's research efforts as well as a multiyear commercial deal with Option Care Health (OPCH 1.09%) to use Palantir's artificial intelligence platform to improve the company's nurse scheduling, patient onboarding, supply chain execution, and other functions. Palantir has been making a move in healthcare. Its software is now being used in hospitals representing 16% of the beds in the country, up from just 1% a year ago.
3. Scalability and starting lines matter
Palantir was losing a lot of money when it went public. That's not the case anymore. It has posted four consecutive quarters of reported profitability, and analysts see reported bottom-line gains continuing to grow faster than the top line through at least the next couple of years. As a bonus, even Wall Street's projections have proved conservative. Palantir has posted double-digit percentage beats on the bottom line in three of the past four quarters.
Despite the stock's stellar 2023, zoom out, and the stock chart isn't as flattering. Palantir stock traded as high as $45 three years ago. Revenue has more than doubled in that time, and it's obviously profitable now. The stock can double from current levels and still be well below its all-time high. In short, it's not too late to consider Palantir as an investment.
