PLTR - Palantir: Momentum In AIP Is Encouraging But Wait For A Better Entry Point

2024-06-27 11:25:52 ET

Summary

• Palantir reported strong Q1 FY24 earnings with revenue and earnings growing 21% and 76% YoY respectively, driven by acceleration in the commercial segment as it invests in AIP.
• During the quarter, the company was able to acquire new customers, while expanding usage of AIP among existing customers across use cases and industries, as it drives successful bootcamps.
• Simultaneously, the company is well positioned in the government segment, as it was awarded $178M by the US Army to build TITAN Next Generation Deep Sensing capability.
• Although I am optimistic about the company’s long-term prospects, I believe upside may be capped in the short-term, especially with growing probabilities of a pullback in the overall market.
• Plus, momentum in AIP may take a breather as companies slow their spending on training new models in the coming business cycles. Assessing both the “good” and the “bad”, I will rate it a “hold”.

Introduction & Investment Thesis

Palantir ( PLTR ) builds and deploys software platforms that serve as the central operating systems for customers, enabling them to integrate their data, decisions, and operations to improve business outcomes. The company reported its Q1 FY24 earnings in May, where revenue and earnings grew 21% and 76% YoY, respectively, beating estimates on both counts. The strength in revenue was driven by acceleration in the commercial segment as the company continues to invest in its Artificial Intelligence Platform (“AIP”) to land new customers and drive deeper adoption where it is expanding across use cases and industries. Simultaneously, it is also well positioned in its government segment, which currently accounts for 52% of Total revenue as it was awarded $178M by the US Army in Q1 to build TITAN Next Generation Deep Sensing capability....

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