After a week or so when investors were more focused on the stock's lofty valuation and concerns about the momentum of artificial intelligence (AI) adoption, Palantir Technologies(NYSE: PLTR) delivered a third-quarter report on Tuesday morning that helped the stock shake off its brief malaise and sent it sharply higher. In fact, it rose by as much as 24.1% and hit a new all-time high. As of 1:51 p.m. ET, the stock was still up by 22.2% for the day.
After a jump of that magnitude, some investors may wonder if it's simply too late to buy the stock.
Bullish signals abound
Palantir has been on a blistering rally since the advent of generative AI early last year, with the stock up by around 689% (as of this writing). The company's AI-powered data mining solutions were already used widely by agencies of the U.S. government and its allies, but the debut of Palantir's Artificial Intelligence Platform (AIP) has taken its U.S. commercial revenue to the next level.
Some analysts and industry watchers have expressed concerns as to whether the company's growth streak could continue, but the seemingly insatiable demand for AI solutions was evident in Palantir's latest results. In the third quarter, revenue grew 30% year over year to $726 million, far outpacing the high end of management's forecast and analysts' consensus estimates, which were both at roughly $701 million.
The results were fueled by U.S. commercial revenue, which soared by 54% and now accounts for 25% of total revenue. Furthermore, its U.S. commercial customer count climbed by 79%. The company's potential to expand its user base well beyond its defense and intelligence industry roots is seen as critical to Palantir's future success, and its progress in that regard has been undeniable. Additionally, the company's profits continued to expand as earnings per share (EPS) climbed 43%.
The quintessential question
The issue of Palantir's valuation remains. Wall Street is forecasting EPS of $0.43 next year, which means the stock is still selling for more than 100 times forward earnings -- so it won't be a fit for every investor.
However, Palantir maintains a unique position in the AI ecosystem, having perfected its craft over more than two decades. Its "boot camps" give potential customers a way to work side by side with Palantir engineers to see how they would develop AI solutions that are directly relevant to their business needs.
I am confident in Palantir's prospects, which is why I've been adding to my position. For those who are leery of its valuation, I would suggest using a dollar-cost averaging strategy or buying on any weakness.
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Danny Vena has positions in Palantir Technologies. The Motley Fool has positions in and recommends Palantir Technologies. The Motley Fool has a disclosure policy.
