Last Updated on December 30, 2023 by SPN Editor
Wedbush Securities anticipates a substantial 25% surge in tech stocks, including Palantir Technologies (NYSE: PLTR) in the forthcoming year. The firm’s analysts, Daniel Ives and Strecker Backe, are bullish about the sector’s prospects, especially with the ongoing recovery from the COVID-19 pandemic.
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Wedbush Securities predicts that the economic revival will bolster the fundamentals and growth trajectories of the sector, particularly for companies poised for a nationwide reopening. This ensuing phase could propel tech stocks upwards by an additional 20% to 25%, as per Wedbush’s predictions.
Since March, Wedbush Securities has maintained a positive outlook on tech stocks. They argue that the initial phase favored cloud/consumer services like Apple, Amazon, Netflix, and Disney; cybersecurity firms like Zcaler, Crowdstrike, and Okta; and remote work stocks like Zoom Video, Docusign, and Slack. Wedbush Securities now foresees a second phase where the economic recovery will further enhance the fundamentals and growth paths of well-positioned tech stocks.
Wedbush Securities is endorsing Palantir (PLTR) and forecasting a 25% surge in tech stocks for the upcoming year, including Palantir. Palantir provides a unique database service that swiftly processes vast data quantities and delivers practical insights. Its initial triumph was largely due to military contracts, but it has been diversifying into other governmental and commercial sectors.
Palantir’s Software as a Service (SaaS) simplifies complex data results, which has propelled it into the AI market boom. Despite the company’s projected growth being less than 20% and only marginally profitable, the stock has seen a nearly 200% increase this year.
What is Wedbush Securities View on Palantir Technologies?
Wedbush Securities, an investment firm, likened Palantir Technologies (NYSE:PLTR) to the Argentinian football legend Lionel Messi, implying that Palantir is a superstar in the realm of artificial intelligence.
Wedbush Securities analysts, spearheaded by Dan Ives, expressed in their study that Palantir is strategically positioned to leverage the robust commercial and governmental expenditure momentum as we approach the end of the year and look toward 2024. They anticipate that Palantir will secure a significant portion of the global AI market as both enterprises and governments strive to enhance efficiency and automate intricate workflows.
Palantir’s Financial Projections and Market Dynamics
Palantir Technologies (NYSE: PLTR) is anticipated to experience robust growth in the next five years, with an estimated revenue hitting the $5 billion mark by 2025. The company’s recent strides in establishing a robust ecosystem of commercial customers for its Artificial Intelligence Platform (AIP), including prominent names like Cisco, J.D. Power, Molson Coors, and PwC, underscore its potential for significant revenue expansion.
According to Wedbush Securities estimates, Palantir’s bottom line is expected to surge at a Compound Annual Growth Rate (CAGR) of 82% over the next five years. The company’s current earnings per share (EPS) of $0.06 in 2022 could see a substantial leap to $1.20 per share by the end of 2027.
Despite currently trading at forward earnings multiple of 69 times, considered on the higher side, Palantir’s robust growth trajectory could justify this valuation. Even with a discounted forward earnings multiple of 40, analysts project a potential surge in the stock price to $48 after five years, reflecting a staggering 180% increase from its current levels.
Challenges and Opportunities for Palantir
While Palantir has clinched notable achievements, including a $115 million add-on to a U.S. military contract, challenges persist in penetrating the European public sector. The company’s CEO, Alex Karp, acknowledged the hurdles faced in expanding into Europe’s defense market, citing difficulties in navigating and penetrating the European landscape.
AI integration is expected to be pivotal in accelerating Palantir’s growth, given the vast revenue opportunities it promises. Notably, Palantir has secured significant contracts in the AI domain, including a $250 million deal with the U.S. Army for AI and machine learning capabilities, further solidifying its position in this realm.
While momentum-driven investors, like Cathie Wood’s Ark Invest, have shown confidence by acquiring substantial shares of Palantir, challenges persist outside the U.S. market. Palantir’s CEO expressed frustration with the company’s struggles in Europe, emphasizing the inherent obstacles in expanding into non-U.S. territories.
Market Perception and Value Considerations
Palantir’s stock surged by more than 100% in 2023, leading to discussions around its current valuation. While the company has demonstrated consecutive quarters of profitability and surpassed Wall Street’s earnings estimates in the third quarter of this year, concerns arise regarding its price-to-earnings ratio.
The company’s trailing 12-month price-to-earnings ratio stands around 250x, significantly higher than the sector median ratio of 27x to 28x. This discrepancy indicates that much of Palantir’s anticipated growth might already be factored into its current stock price.
While momentum remains in Palantir’s favor for the coming year, investors mindful of value propositions might exercise caution, given the company’s potentially high valuation relative to its expected growth. Traders seeking value-conscious investments might exercise restraint at Palantir’s present share price.
Why Palantir is Different from Other AI Companies?
Exceptional Data Analysis: Palantir offers a unique database service that rapidly processes large data volumes and provides actionable insights. This capability to decode complex data has thrust Palantir into the AI market surge.
Varied Clientele: Although Palantir initially found success with military contracts, it has since expanded into other government and commercial sectors.
Respect for Data Privacy: Contrary to many tech firms, Palantir’s business model does not rely on personal data monetization. They do not gather, retain, or sell personal data.
AI/ML Deployment Framework: Palantir is transforming the way organizations construct and implement AI/ML by merging the enterprise data foundation with a comprehensive AI/ML deployment infrastructure. This allows data scientists and engineers to tailor, deploy, evaluate, and compare a range of algorithms, from homegrown to open-source and third-party.
Not a Data Firm: Palantir does not identify as a “data broker” or “data aggregator”.
These factors contribute to Palantir’s distinctive standing in the AI sector and are one of the reasons Wedbush Securities has confidence in Palantir Stocks.