Can Palantir’s Impressive Stock Performance Continue? (NYSE: PLTR)

Palantir Technologies (NYSE: PLTR), a prominent name in the field of artificial intelligence solutions, has had quite a remarkable year with significant growth spikes that have caught the attention of investors. Amidst this backdrop of financial success, Palantir's stock price has soared, enjoying a 161% year-to-date gain, and bringing in new 52 week highs that are three times the low of the period.

Much of this surge can be attributed to its operational successes, and the development of their AI platform, Advanced Insights Platform (AIP), which has unveiled substantial opportunities for the company and translated into accelerated revenue growth. From a stock perspective, PLTR earning it's way into the S&P 500 has certainly done no harm to prospects of a sustained bull run.

In the quarter that ended on June 30th, Palantir witnessed a commendable 27% increase in revenue year over year. Notably, a substantial part of this growth came from the U.S. commercial segment, which experienced a 55% rise in sales. As we peer into the future, Palantir has set its sights even higher, expecting its U.S. commercial business to burgeon by at least 47% for the full year of 2024. The company projects an overall revenue of around $2.75 billion, with a growth rate of 23%.

While the company seems to revel in this extraordinary growth, its valuation has skyrocketed, presenting a potential risk for investors. Currently, Palantir trades at 255 times trailing earnings. Such a high valuation may give pause to investors, who must weigh the premium price against the company's long-term prospects.

Adding another layer of complexity to Palantir's future is the U.S. government's initiative to diversify its tech vendors. This strategy could have implications for Palantir, as government contracts have traditionally been a vital part of its revenue stream. Although government business still represents the majority of income, it grew at a slower pace in the last quarter compared to the commercial segment.

Such has been the acceleration of the stock that analysts have largely been caught and surpassed in recent times, with the consensus target now below the current price action. Wedbush are one of those to have upgraded Palantir's stock in the past few weeks, moving their bar from $38 to $45. With PLTR now changing hands in the mid $43 range after almost 20% growth in the past month, the Outperform rating put in place is now close to current action.

While Palantir has recently enjoyed both profitability and business growth, the inflated valuation might pose a challenge to its sustained stock market performance. The next earnings numbers in November will likely need to come in towards the upper end of the expected range in order to sustain the rally, but if past performance is anything to go by, some comfort could be taken from PLTR beating both revenue and EPS for each of the past four quarters.