There's little question that Palantir (PLTR 3.73%) has benefited from the growing adoption of artificial intelligence (AI). While the company's data mining and AI services were once the province of the U.S. government and its allies, Palantir has branched out, providing services to private companies with AI and business analytics services. Strong and growing demand has supercharged its stock, which is up 236% over the past year.
One Wall Street analyst believes there's much more to come.
Capitalizing on the AI gold rush
Wedbush analyst Dan Ives boosted his price target on Palantir to $35 while maintaining an outperform (buy) rating on the stock. That represents potential gains of 42% compared to stock's closing price on Tuesday. Ives believes investors are underestimating Palantir's Artificial Intelligence Platform (AIP), which he claims is regarded by many U.S. business as the "launching pad of AI use cases."
The analyst goes further, suggesting Palantir could generate revenue of $5 billion by fiscal 2027.
The path to profits
I believe Ives is on to something. Palantir has been running AIP bootcamps non-stop, which take customers "[f]rom 0 to use case in 5 days or less," according to the company. "These immersive, hands-on-keyboard sessions allow new and existing customers to build live alongside Palantir engineers, all working toward the common goal of deploying AI in operations."
Demand for these customizable systems is off the charts. In October, management set a goal of running 500 such boot camps over the coming year. By early February it had already conducted 560, so the strategy is clearly paying off.
To achieve $5 billion in revenue by 2027, Palantir would only need to achieve a compound annual growth rate (CAGR) of about 23%. That might be a tad ambitious but not unreasonable, given its 20% growth in the fourth quarter. If Palantir hits Ives' revenue target of $5 billion by 2027, that works out to a forward price-to-sales ratio of about 11, making the stock a steal at the current price.
