Palantir Technologies Inc. (NYSE:PLTR) is targeting 30% annual revenue growth during the next five years
Capital Ideas Media | April 9, 2021 | SmallCapPower: Whether we like it or not, Artificial Intelligence (AI) is part of our lives and will probably have an even greater influential on our actions in the future. Anyone who has order an item from Amazon or used Google (especially its YouTube property) has been exposed to AI and, perhaps, even allowed it to contribute to their decision-making process.
(Originally published on Capital Ideas Media on March 2, 2021)
According to Grand View Research, the market for AI will continue to grow at a compound annual rate more than 42% until 2027.
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And while it’s doubtful we can stop the growing presence of AI in our lives, at least as investors we can, hopefully, profit from its proliferation.
A name we are most excited about in this space is Palantir Technologies Inc. (NYSE:PLTR). Palantir is a software company that is focused primarily on big data and big data analytics.
About 56% of Palantir’s revenue in 2020 was derived from government contracts, although private sector adoption of the Company’s technology has also been increasing.
For example, mining giant Rio Tinto signed a multi-year contract with Palantir to integrated data from more than 90 of its systems into a digital business to increase production and enhance profitability.
During the fourth quarter of 2020 alone, the Company signed 21 contracts valued at $5 million or more, 12 of which were worth more than $10 million.
This helped boost Palantir’s revenue up 47% year over year to $1.1 billion in 2020, while its gross margin during Q4 was a whopping 78%. And, the Company’s average revenue per customer rose 41% for the year.
Goldman Sachs analyst Christopher Merwin recently upgraded Palantir Technologies stock to “Buy” from “Neutral,” while hiking his target price to $34 per share from $13, after the Company provided guidance of 45% revenue growth for its first quarter and 30% plus growth for Fiscal 2021.
The analyst also said he is “encouraged” that Palantir management is targeting $4 billion in revenue by Fiscal 2025, which implies a yearly growth rate of about 30%.
Jefferies analyst Brent Thill, meanwhile, is even more bullish on Palantir with a $40 price target, viewing the Company as “a highly unique story for long-term investors” given that he thinks its growth sustainability at significant scale, and “aggressive profitability ramp,” puts the stock “in rarified air” among software companies.
Our runner-up in the AI space is C3.ai, Inc. (NYSE:AI). C3.ai is software provider with variety of applications that can, for example, help utility providers with predictive maintenance and energy management and aid banks in flagging suspicious transactions.
Wedbush analyst Daniel Ives recently initiated coverage on the stock with an “Outperform” rating and a $200 per share price target, calling C3.ai “one of the more disruptive enterprise software vendors in the last decade.”
He added that with a total addressable market of $270 billion and a product portfolio that is “unmatched in the enterprise landscape,” C3 has the ability to “further penetrate enterprises and governments across the board over the coming years.”
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