Palantir Technologies (PLTR +3.03%) has soared in recent years -- and even defied today's market turmoil. Though the stock slipped along with major indexes in recent weeks, it's since rebounded and is up 33% so far this year. Investors have flocked to Palantir due to its seemingly unstoppable revenue growth and popularity with both government and commercial customers. Demand for its artificial intelligence (AI)-driven software has been high, and Palantir seems to be in the early stages of its growth story.
Now, the company is gearing up for a moment that could represent a catalyst for stock performance. And that's the release of the quarterly earnings report on May 5. Palantir has surpassed expectations in recent quarters, and forecasts have continued to be bright. But it's important to keep in mind that general expectations for economic growth have weakened over the past several weeks amid uncertainty about President Donald Trump's proposed tariffs on imports.
This could weigh on companies' prospects as customers, in a time of economic turmoil, may become more cautious about spending. And any potential words of uncertainty from Palantir regarding this might worry investors.
Although the general market backdrop may be difficult, there are many reasons to be optimistic about Palantir. Considering all this, should you buy the stock before May 5? Let's find out.
Image source: Getty Images.
Palantir's government revenue
First, a bit about Palantir's development over time. The company may have leaped into the spotlight in recent quarters, but it's actually been around for more than 20 years. In its earlier days, Palantir was most associated with government contracts, and these deals remain an essential part of the company's success. For example, in the most recent quarter, U.S. government revenue made up 60% of total U.S. revenue and climbed in the double digits, showing it is still a source of growth for Palantir.
On top of this, over the past several quarters, Palantir has seen a fantastic trend, specifically growth in its commercial business. The company now has 382 U.S. commercial customers, almost 5 times more than just three years ago. Revenue from these customers rose 64% in the latest quarter after delivering double-digit growth in previous quarters, too. And Palantir closed a record level of U.S. commercial total contract value at more than $800 million.
Harnessing the power of AI
Why are both the government and businesses flocking to this tech company? Palantir has long been recognized for its software platform, which helps customers aggregate and make better use of their data. But about two years ago, it launched its Artificial Intelligence Platform (AIP), which harnesses AI to optimize the power of a customer's data.
For example, AIP could help the military swiftly survey a danger zone, anticipate situations, and develop effective action plans. In the commercial arena, it might help a customer better organize its operations or distribution of a product to avoid waste. And these are just a couple of quick examples. The platform is far-reaching, offering game-changing possibilities for many businesses and government projects.
NASDAQ: PLTR
Key Data Points
So, it's easy to understand why Palantir has seen growth take off. The company is optimistic about what's to come, most recently predicting first-quarter revenue of as much as $862 million. That represents a year-over-year increase of about 35%. And the company expects adjusted income from operations to climb as much as 58%.
What could happen after May 5
If, on May 5, Palantir meets or beats its first-quarter forecast and offers investors comforting words regarding its growth in the months to come, the stock could jump. That said, expectations are high, and investors are on edge today amid uncertainty about Trump's tariff plan. If Palantir's earnings or forecast disappoint, the shares could tumble.
So, rushing out to buy Palantir before May 5 to potentially benefit from earnings news is a bet on the short term, and that's risky. But here's the good news: If you zoom out and take a long-term view, you don't have to time your purchase of this or any other stock. Investors who buy Palantir today or a month from now and hold on for a number of years won't see much of a difference in their returns, as short-term fluctuations generally have little impact on stock performance over five or 10 years.
Now, here's the next question: Should you buy Palantir? This stock looks expensive by many valuation measures, but the forward price/earnings-to-growth (PEG) ratio, which accounts for growth, shows it could be a reasonable buy at today's level of 0.9. A level of 1 or higher suggests a stock is overvalued.
Ultimately, though, the decision whether to buy Palantir depends on your investment style. Value investors surely should skip it, but aggressive tech investors who don't mind paying a bit more for a top-performing company may scoop up a few shares today -- and keep this player in their portfolio for the long haul.
