1 Incredible Growth Stock That Doubled in 2024 to Buy Hand Over Fist Before Rising at least 48%

Palantir Technologies (PLTR 0.60%) has been one of the best-performing stocks on the market in 2024, up 115% at the time of writing, thanks to its accelerated growth, which is driven by rapidly growing demand for the company’s software platforms from both federal customers, as well as commercial customers. .

Artificial intelligence (AI) has begun to play a key role in accelerating Palantir’s growth of late. The bright side is that Palantir is the top player in the AI ​​software platform market, according to market research firm Forrester. This puts the company in a great position to ensure that the growth rate continues to increase and reach stronger levels in the long term.

More importantly, a look at Palantir’s recent client gains indicates that the company’s offerings continue to remain in hot demand, and that could pave the way for higher stock growth going forward. In this article, I’ll take a closer look at how Palantir is capturing the lucrative AI software platform market and examine why it’s likely to lead to remarkable long-term earnings growth.

Palantir’s AI juggernaut shows no signs of stopping

Palantir released its second quarter 2024 results on August 5. Its revenue rose 27% year-over-year to $678 million, which was a significant improvement over the 13% year-over-year revenue growth it reported in the same quarter last year. year. Meanwhile, the company’s non-GAAP earnings rose 80% from the year-ago quarter to $0.09 per share.

This impressive growth in Palantir’s top and bottom line results was the result of robust growth in its customer base, an expansion in customer spending, as well as strong unit economics that allow it to generate more profit from each customer. For example, Palantir’s number of US commercial customers grew 83% year-over-year, but total contract value from US commercial customers grew at a much faster rate of 152%.

On the other hand, the company’s adjusted operating margin increased to 37% in Q2 from 25% in the same quarter last year. This remarkable increase in Palantir’s margins explains why its bottom line grew so much last quarter. The good news for Palantir investors is that it has won more deals since reporting results last month.

For example, Palantir’s Artificial Intelligence Platform (AIP) is set to be implemented by at Wendy’s Quality Supply Chain Cooperation (QSCC). Palantir points out that QSCC is the second largest purchasing cooperative in the quick service restaurant industry and serves more than 6,400 Wendy’s locations in the US and Canada. The cooperative will implement AIP to “improve the scale and speed of decision-making” initially before using the platform for supply chain management and waste prevention.

Earlier this month, Palantir announced that the British oil and gas giant BP “will expand their strategic relationship and introduce new AI capabilities with Palantir’s AIP software.” But that’s not where Palantir’s recent customer announcements end, as Nebraska Medicine, an academic health system, has inked a multi-million dollar deal to implement AIP.

And recently, Palantir said it was awarded a $100 million contract by the Army Research Laboratory to use the Maven Smart System, a platform that provides AI capabilities to the Department of Defense.

The above developments indicate that Palantir’s AI is still running and is unlikely to stop anytime soon. This is because market research company IDC expects the global AI software platform market to grow at an annual rate of nearly 41% through 2028, generating annual revenue of $153 billion by the end of the forecast period.

IDC adds that Palantir is among the top five AI platform software vendors, which means the company is at the beginning of a massive growth curve, given that the AI ​​platform software market was worth just under $28 billion last year.

Outstanding earnings growth could translate into greater stock price growth

Palantir’s huge addressable market, its leading position in the AI ​​software market, and strong unit economics that translate into healthy margin gains explain why analysts expect the company’s earnings to grow at a phenomenal 85% annual rate over the next five years. Even though such an aggressive earnings growth rate seems ambitious, it will not be surprising to see Palantir actually deliver the remarkable earnings growth that the market expects from it due to the points discussed above.

But even if the company posts a relatively slower annual earnings growth rate of 50% over the next five years, its bottom line could jump to $1.90 per share five years from now (based on its 2023 earnings of 0 .25 USD per share). The stock is currently trading at 87 times trailing earnings. Assuming it trades at a discount of 29 times forward earnings after five years (according to technology Nasdaq-100 index being used as a proxy for tech stocks), its share price could jump to $55.

This would be a 48% increase from current levels. But if Palantir manages to post faster earnings growth and the market decides to reward it with a richer earnings multiple because of its remarkable growth, it could deliver much stronger earnings. That’s why investors looking to add a growth stock to their portfolios would do well to buy Palantir before it moves higher, following the tremendous gains it’s already delivered this year.