Palantir (PLTR 1.38%) has been at the front of the artificial intelligence (AI) movement since it began. The company has been deploying AI for decades, so it understands what the technology can do better than most.
It's also seeing "unprecedented" demand for one of its latest product launches, which is one of the reasons the stock has performed so well in 2024 (up more than 30%). However, the stock hasn't seen much movement since Palantir reported fourth-quarter results. As a result, investors might wonder if it's time to load up on Palantir stock in preparation for the next quarterly earnings event, which could hold even better news.
Palantir's AI products are in high demand
Palantir's products are focused on developing AI-powered systems that help businesses and governments accomplish daily tasks and help the inner workings of a business. At first, Palantir's product suite was developed for government use, as it helped process data needed to pinpoint terrorists or give battlefield commanders the best information possible to make a tactical decision.
Eventually, this software was converted to civilian use, drastically increasing Palantir's market opportunity. But Palantir's latest product has been a complete game-changer for the company.
Palantir's Artificial Intelligence Platform (AIP) is a way to integrate generative AI models into the business and gives developers access to various tools to make this integration smooth. Chief Revenue Officer Ryan Taylor commented during Palantir's Q4 results that the "level of customer enthusiasm and demand that we are currently seeing from AIP" has never been seen before. That's massive news for investors and it indicates Palantir could be seeing significant growth.
However, Palantir's growth right now isn't as fast as you'd expect it to be.
The stock carries a premium price tag for its growth levels
In Q4, Palantir's revenue increased by 20% year over year to $608 million. This is a great figure and satisfactory, but compared to many software companies, it has a slower growth rate. But if you zoom in past the headline number, it reveals a key trend.
U.S. commercial revenue increased at an astounding 70% pace to $131 million. This rapid increase is largely due to AIP adoption, and with management not seeing demand fade away, it will likely continue this rapid growth for some time.
Palantir's various government customers have been slower to adopt AI, as there are many questions about how integrated AI should become into military operations. This is reflected in government revenue rising 11% year over year. One thing to note is that government revenue makes up $324 million of its total, so this business is still the most critical part of Palantir, despite a rapidly increasing U.S. commercial business.
If Palantir can continue to grow demand for its AIP and get some government customers to adopt it, the stock could be primed to explode higher. This is also why the stock carries a premium price tag, as many expect it to do that in the future.
PLTR PS Ratio data by YCharts
At 23 times sales, Palantir is valued higher than its growth rate. This is a quick rule of thumb when utilizing the price-to-sales (P/S) ratio to determine how expensive a stock is. However, this premium valuation is understandable with investor enthusiasm at a high point due to AI adoption.
It also should prevent investors from loading up on Palantir stock. But if you're interested in the company, it could be a smart time to grab a share or two to track the business, but it's a very expensive time to take a full entry into the stock.
As a result, I'd be more patient, as the market could continue selling off the stock, just like it has for the past couple of weeks.
