Shares of Palantir Technologies (PLTR 10.38%) surged in Tuesday’s trading following a strong quarterly report. The software specialist ended the day up 10.4%, according to data from S&P Global Market Intelligence.
Palantir published its second-quarter results after the market closed yesterday, and they came in better than anticipated. The company recorded adjusted earnings per share (EPS) of $0.09 on revenue of $678 million, topping the average Wall Street earnings target by $0.01 per share and the average sales target by roughly $25.7 million.
Overall revenue was up 27% year over year in the period, and adjusted EPS was up 80%. The company also raised its full-year targets for sales and operating income. Investors responded to the strong beat-and-raise quarter today by buying up the stock.
Can you still score big wins with Palantir?
With today’s pop, Palantir is now up roughly 55% year to date. On the other hand, the share price is down roughly 32% from the high that it reached shortly after going public in 2021. It’s a volatile stock and undeniably trades at a highly growth-dependent valuation.
PLTR PS ratio (forward) data by YCharts; PS = price to sales; PE = price to earnings.
Palantir is valued at roughly 76 times this year’s expected adjusted earnings. The company is also trading at more than 21 times expected sales. This valuation profile means the stock is relatively high risk, but there are signs that the data software specialist can live up to and exceed its current valuation.
It continues to record encouraging margins, and its sales growth has actually been accelerating lately. There’s a good chance this trend can continue.
Sales to private-sector customers increased 33% year over year in the second quarter and accounted for roughly 45% of overall sales. Within the segment, sales to U.S. commercial customers increased 55% year over year and accounted for 52% of sales. Aided by the company’s Artificial Intelligence Platform (AIP) suite, the private-sector growth engine is looking very strong.
Even with growth also picking up among government customers, the commercial segment will likely soon account for more than half of overall revenue. Given the very strong momentum the segment is seeing, there’s a clear path for growth to continue accelerating.
For risk-tolerant investors looking to back strong AI players, Palantir’s recent business update provided a long list of bullish indicators.
Keith Noonan has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Palantir Technologies. The Motley Fool has a disclosure policy.
