Investors have been looking for potential winners in the high-growth area of artificial intelligence (AI), and Palantir Technologies (PLTR 3.73%) has caught their attention. But this software-as-a-service company isn't a new player. It's actually been around for more than 20 years, helping customers aggregate disparate data across their organizations and harness it to make key decisions.
Palantir often has been associated with government contracts, and these clients have driven revenue growth over the years. But times are changing. The commercial customer has emerged as a growing one, and Palantir's focus on AI is giving this trend a significant boost.
The stock's performance has reflected this potential, with Palantir shares soaring more than 200% over the past year. And the company, which has grown revenue over time, just recently reached profitability as AI clients supercharge earnings.
Palantir clearly is at the start of a new era of growth, but could that drive the stock high enough to help make you a millionaire? Let's find out.
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Making better use of data
As mentioned above, Palantir helps clients make better use of their data, which leads to the saving of time and money. It can help customers in a vast number of ways, making it a platform that's widely applicable across businesses and governments.
For example, the U.K. government used Palantir to help it launch coronavirus vaccines and ensure equitable access. And customers have been using Palantir's Artificial Intelligence Platform (AIP) to predict potential materials shortages or to reduce railway network congestion.
All of this means Palantir's revenue opportunity also is quite broad if it can connect to potential customers and show them how its products could improve their operations. And this brings me to Palantir's AIP, launched just last year. The company has come up with a great way to introduce the platform to potential users: It offers AIP Bootcamps.
These sessions allow customers to jump right in and explore how the AIP system can solve their companies' particular problems. These have been immensely popular, with Palantir writing in a blog post last fall about a "growing backlog of AIP Bootcamps due to the overwhelming demand." CEO Alex Karp even said in his recent annual letter that he sees AIP as the future of the company.
What's particularly important is that Palantir's AIP supports a trend that's already been gaining momentum, and that's the growth of commercial customers. It's great to have government contracts, but reliance on this sector carries risk and limits revenue growth potential.
Palantir's commercial revenue
Today, Palantir seems to be moving toward the best of both worlds. The company's government revenue continues to increase, but commercial revenue is climbing even more, and the number of commercial customers is multiplying. This means that down the road, Palantir could find itself with a well-balanced customer base, serving a hefty number of government and commercial clients.
In the most recent quarter, U.S. commercial revenue in particular stood out. It climbed 70% year over year, and the U.S. commercial customer count increased 55%.
Last year marked Palantir's first profitable year ever, with profitability each quarter, and the company now predicts adjusted free cash flow of at least $800 million this year.
Palantir also forecasts profitability for every quarter of this year and more than $2.6 billion in full-year revenue.
There are many reasons why this trend should continue. The AI market might reach more than $1 trillion by the end of the decade, some research predicts, suggesting companies will prioritize investing in this area. Palantir's work in the commercial market is gaining momentum, putting it on the radar screen of companies aiming to better utilize their data.
Lastly, Palantir has reached the key financial milestone of profitability, and growing free cash flow should help it continue to invest in its technology.
Is Palantir a millionaire maker?
Now, let's get back to our question. Could this innovator help you become a millionaire? Let's look at the recent one-year 200% gain to offer us an idea. If you had invested $10,000 in Palantir prior to that, it now would be worth more than $30,000, considering a 200% increase. That's fantastic, but it's clearly far from the millions mark. You would have had to invest an enormous amount in the company in order to become a millionaire.
But don't let that discourage you. In general, investing in just one stock won't make you a millionaire, and focusing on one stock only is pretty risky. Investing in a selection of quality players over time is a better idea because, together, they could help you grow wealth and even possibly become a millionaire without betting the farm on just one player.
And Palantir, thanks to all of the points I mention above, makes a great stock to add to a portfolio with millionaire-maker potential and hold on to for the long term.
