Palantir Technologies (PLTR +0.12%) is a top data analytics company that has been leaning heavily into artificial intelligence (AI) of late. It launched a new AI platform, AIP, last year, and that has helped it grow its sales at a faster pace. And a recent report suggests that AIP may be better than the competition. Could this help lift this already scorching-hot stock to new heights?
NASDAQ: PLTR
Key Data Points
AIP ranks high in research report
Palantir's future growth prospects are going to hinge largely on how well AIP does. The company has been investing aggressively into its growth by launching boot camps with prospective customers to uncover opportunities where the platform can help them, which can lead to conversions and greater revenue growth down the road.
A recent report from Forrester Research, an advisory company, ranked Palantir's AIP as the best AI and machine learning platform. It was compared against other products from big-name tech companies, including Alphabet and Microsoft. Forrester reviewed 14 vendors in total, with Palantir's platform standing out from the pack.
"Palantir's AIP platform has strong capabilities across data ingestion and preparation, with intuitive user interfaces and automation," Forrester said.
The positive assessment of AIP not only helps communicate to investors the strength of the overall platform and what it offers, but it can also entice buyers who are looking for an AI platform to choose Palantir, knowing that it may offer a better option for their needs.
Palantir's growth rate has been accelerating
AIP has helped Palantir's growth rate hit a new gear in recent quarters. A couple of years ago, it looked as though Palantir's business was showing signs of slowing but thanks to AIP, the company's growth rate has been taking off of late. At more than 27%, its growth rate is now around where it was two years ago.
And if this report can help win over more customers who may be on the fence about Palantir's AI solutions, that can potentially result in this growth rate accelerating even further.
PLTR Revenue (Quarterly YoY Growth) data by YCharts
Why it may not be smooth sailing for Palantir's stock
Palantir's stock has doubled this year and while the Forrester report is encouraging, that doesn't mean that the AI stock is a lock to continue its rally. There are concerns that a recession may be around the corner, highlighted by an underwhelming jobs report announced recently.
And should there be a downturn in the economy, spending on AI and tech in general could come down significantly in the near future. As good of a platform as Palantir may have in AIP, it may not be of much help to the business if as a whole, in the economy, there is less spending on AI.
It also doesn't help that Palantir's stock is trading at an egregious 70 times its estimated future earnings. While its shares have been rallying of late on news that the company will be joining the S&P 500, investors may want to think twice about buying the stock at such a high valuation, with potential headwinds to worry about in the not-too-distant future.
Should you buy Palantir stock?
Palantir's business has been doing well, but I don't see a compelling enough reason at this point to look past its obscene valuation and conclude that the stock's price isn't grossly inflated.
While its top line may increase in upcoming quarters, I'm not as confident its bottom line accelerating fast enough where the stock may end up becoming a good buy. There are better AI stocks out there for investors to consider than Palantir.
