Palantir's (PLTR +1.25%) valuation may look a little rich, but there are plenty of ways to invest in its technology without buying the stock. One way is through FTAI Aviation (FTAI 8.76%), a stock that's up a remarkable 219% over the past year. Its recent deals with Palantir and GE Aerospace (GE 5.67%) have significantly strengthened the investment case for the stock. Here's why.
FTAI Aviation latest updates
The company's core activity is owning and maintaining aircraft engines for airlines, cargo companies, and leasing companies. It offers a relatively lower-cost way for airlines to maintain engines, notably the V2500 and the CFM56, when their long-term service agreements signed with engine manufacturers on the initial sale run out. The CFM56 comes from CFM International, a GE Aerospace joint venture with Safran, and is used on the legacy Airbus A320 family and the legacy Boeing 737.
NASDAQ: FTAI
Key Data Points
FTAI maintains a competitive yet collaborative relationship with GE Aerospace, competing in engine servicing while also supporting demand for CFM engines and extending their operational lifespan.
Partnerships with Palantir and GE Aerospace
The relationship with CFM International was solidified into a strategic partnership with the recent signing of a multiyear agreement, under which FTAI "secures OEM replacement part supply, thrust performance upgrades, and component repair" from CFM International.
It's a great deal for FTAI, as GE Aerospace management has pushed out the timeline for when it expects CFM56 shop visits, when engines are brought in for major overhauls and maintenance, to start declining from 2025 to 2027, on the back of strong airline demand.
Image source: Getty Images.
However, FTAI's dealmaking doesn't stop there; in November, it signed a multiyear strategic partnership with Palantir to use its artificial intelligence (AI) technology to achieve "faster production turnaround times and improved unit economics, aiming to bring further cost savings to its customers globally."
FTAI Aviation and AI
Shortly after, FTAI announced the launch of FTAI Power, a business that will convert the CFM56 into power turbines used to deliver energy to data centers. Management believes it can deliver more than 100 units every year "by applying its modular maintenance model to power turbines." That model is highly likely to rely on Palantir's AI platform to digitally model the power turbines and predict when they need servicing and parts available.
As a result, FTAI benefits from increased productivity through AI and the growing demand for data center power driven by AI applications.
Image source: Getty Images.
Is FTAI Aviation stock a buy?
Trading at 43 times forward earnings, the stock isn't exactly a compelling value, but it definitely has a long growth path ahead, both in servicing aircraft engines and in FTAI Power. Moreover, the inking of strategic partnerships with Palantir and GE Aerospace, both global leaders in their industries, reduces risk and could lead to future earnings estimate upgrades.
While now may be an opportune time to consider investing, FTAI is also worth monitoring for potential opportunities during any market-driven pullback.
