Palantir Technologies (PLTR 0.97%) has reaped the benefits of the growing utility of artificial intelligence (AI). The company's AI and data mining solutions have fueled sales growth and rising profits, and Palantir was recently selected for inclusion in the S&P 500, sending the stock 15% higher so far this week.
One Wall Street analyst believes that's just a springboard to greater things.
Revisiting the thesis
Bank of America analyst Mariana Perez Mora boosted her price target on Palantir stock to a Street-high $50, while maintaining a buy rating on the shares. For those keeping score at home, that represents a potential upside for investors of 45%, compared to Monday's closing price.
The analyst believes there's a "fundamental misunderstanding" about Palantir's potential. The stock's inclusion in the benchmark index marks a "watershed moment for institutional investors" as they'll have to reconsider what they think they "know" about Palantir, which could act as a catalyst.
The analyst has clearly done her homework. In the second quarter, Palantir's revenue grew 27% year over year to $678 million, resulting in adjusted earnings per share (EPS) that surged 80% to $0.09.
However, it was the U.S. commercial segment that turned heads, as revenue surged 55% to $159 million, representing 23% of Palantir's total sales. Perhaps more importantly, the segment's customer count surged 83%, while its remaining deal value soared 103%.
Management credited strong demand for Palantir's Artificial Intelligence Platform (AIP), its generative AI solution. The company hosts bootcamps, where customers work with Palantir engineers to develop AIP solutions to real-world problems, which have been instrumental to its recent success.
The company expects its growth spurt to continue, as management raised its full-year guidance, the second increase so far this year. Palantir now expects revenue of $2.75 billion in 2024, up 23%.
Finally, Palantir stock has a forward price/earnings-to-growth (PEG) ratio of 0.33, when any number less than 1 is the standard for an undervalued stock. That's why Palantir is a clear and incontrovertible buy.
