This great strategy can pay off big – Business News (Trending Perfect)


Have you ever watched a webcast or promotion for a new technology and walked away with more questions than answers? I definitely have. The biggest question I often ask is: How can this apply to my company?

Explain it in general, especially with complex Artificial Intelligence (AI) Software, it's hard. Palantir Technologies (NYSE: BLT) He has the solution, and it's pretty cool.

What is Palantir AIP?

Palantir's newest software is its Artificial Intelligence Platform, or AIP for short. This is the view at 30,000 feet. It integrates AIP into the company's existing systems. Now the data is all in one place instead of multiple silos. Next, AIP creates a complete model of the organization's business functions. The software allows the customer to use it Large linguistic models To explore processes, examine potential actions, and ultimately make better decisions. AIP is available to governments (defense) and the private sector.

Here are two examples provided by Palantir. Suppose there is a military unit in the field near hostile territory. The commander noticed that the enemy was collecting weapons nearby. Using AIP, a commander can model scenarios, predict potential enemy formations, and see what assets are available to repel an attack. Next, imagine a private company that has a warehouse in the path of a hurricane. The logistics department can model the impact of a warehouse closure and figure out the most cost-effective alternative locations to deliver customer orders.

Palantir's strategy for bringing this complex software to market is through what it calls “bootcamps.” Unlike explainer videos, five-day workshops allow potential clients to get hands-on experience and solve problems specific to their companies. Obviously, this is a more effective way to present the product. Palantir has completed bootcamps with 915 organizations since mid-2023; It closed 136 deals in the first quarter of 2024 and increased its number of U.S. merchant clients by 69% year-over-year in the quarter.

Is Palantir stock a buy now?

There was a lot to like about Palantir's first-quarter earnings release and long-term trends. Sales rose 21% year over year to $634 million, a slight acceleration compared to the 20% growth recorded in the fourth quarter of 2023. Importantly, customer numbers continue to expand rapidly, as shown in the charts below.

Growth in the number of Palantir customersGrowth in the number of Palantir customers

Image source: Palantir.

Growing the customer base is critical because Palantir's revenue model is recurring, meaning customers pay for the software annually. Once Palantir gets a customer, it can reap the rewards for years.

Palantir was often criticized for its lack of profitability after going public in 2020, but those days are over. The company reported its sixth consecutive quarter of GAAP net income and fifth consecutive quarter of GAAP operating income. It also generates a ton of free cash flow (FCF). As shown below, operating income and cash flow are increasing significantly.

PLTR Operating Income Chart (Quarterly).PLTR Operating Income Chart (Quarterly).

PLTR Operating Income Chart (Quarterly).

Palantir has used earnings and positive cash flow to build a fortress-like balance sheet, with $4.4 billion in current assets versus $751 million in current liabilities and no long-term debt. Responsible cash management provided $43 million in interest income in the first quarter, a 7% increase on top of operating income of $634 million.

The most important risk for Palantir shareholders is valuation. The stock trades for 20 times sales. Although this is less than a growing SaaS company Crowd Strike At 25, and so on Datadog At 19, it's not cheap. Investors are excited about AI companies, and there may be a pullback. For this reason, dollar-cost averaging is a great buying strategy to mitigate risk since you will be purchasing shares for a specific amount invested over recurring intervals.

With its unique sales strategy, positive customer growth trends, and excellent financials, Palantir looks like a long-term winner in the software and AI space.

Should you invest $1,000 in Palantir Technologies now?

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Bradley Guichard He has positions at CrowdStrike. The Motley Fool has positions in and recommends CrowdStrike, Datadog, and Palantir Technologies. The Motley Fool has Disclosure policy.

Palantir: This great strategy can pay off in a big way Originally published by The Motley Fool



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