Should you buy or wait for a pullback?

Palantir Technologies Inc. PLTR has experienced a remarkable year-to-date gain of 75.7%, easily outperforming the overall industry gain of 16.5% and the Zacks S&P 500 Composite growth of 16.9%.

Price development since the beginning of the year

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As of the last trading day, the stock closed at $30.16, just below its 52-week high of $33.12, and it continues to trade above its 50-day moving average, reflecting the prevailing optimism among investors, many of whom are eager to get into the fast-growing artificial intelligence (AI) market.

PLTR shares are trading above the 50-day moving average

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The high interest in AI stocks was widespread and the entire sector saw significant gains. For example, NVIDIA NVDA rose 116.5%, International Business Machines IBM rose 27.3% and oracle (ORCL) has gained 36.6% in the last three months.

With Palantir's continued rise, many investors are faced with the dilemma of whether to jump in now or wait for a potential pullback. So is this the ideal time to buy PLTR stock? Let's examine it in more detail.

AI platform and bootcamps: The core of Palantir’s growth

Palantir's AI-driven solutions are at the heart of its business, particularly in strengthening defense capabilities amid rising geopolitical tensions. A prime example is the recent $480 million U.S. defense contract for its AI system Maven. The company's revenue streams are balanced: 55% comes from government contracts and 45% from commercial ventures. Palantir's focus on AI-driven data analytics, cybersecurity, and information warfare positions the company as a key player in the evolving global security landscape.

Palantir's Gotham platform, widely used by government agencies, continues to secure long-term contracts and contribute to the company's solid double-digit revenue growth and reliable cash flow. In the second quarter of 2024, Palantir's government revenue increased 23% year over year, while U.S. government revenue increased 24%. The company's new AI-powered integrations and product offerings have been particularly well received, not only by its core government clientele, but also by a growing number of enterprise customers.

A big shift for Palantir has been its successful expansion beyond its heavy reliance on government contracts and tapping into the commercial sector. The US commercial division has performed exceptionally well, driven by AI-powered operating systems and bootcamps as core strategies. In Q2 2024, commercial revenue increased 33% year-over-year, with US commercial revenue up 55%.

The story continues

PLTR's strong revenue and earnings prospects

The Zacks Consensus Estimate for PLTR's third-quarter 2024 earnings is 9 cents, representing year-over-year growth of 28.6%. Earnings in 2024 and 2025 are expected to grow 44% and 22.6%, respectively, from the year-ago actuals. The company's revenues in the third quarter of 2024 are expected to grow 26.3% year-over-year. In 2024 and 2025, they are expected to grow 24.2% and 21.5% year-over-year, respectively.

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This positive outlook is supported by upward estimate revisions. Over the past 60 days, six estimates for third-quarter 2024 earnings have been revised upward without any downward revisions, reflecting strong analyst confidence in the company. The Zacks Consensus Estimate for third-quarter 2024 earnings has increased 12.5% ​​during this period. For 2024 and 2025, eight and seven estimates, respectively, have moved upward without any downward revisions during the same period.

PLTR is a buy

Given Palantir's strong positioning in AI and defense, its steady revenue growth in both the public and private sectors, and its impressive earnings forecasts, the stock remains a solid buy. The company's ability to continue to win major government contracts while expanding its commercial presence makes it an attractive long-term investment. As AI continues to drive growth across multiple industries, Palantir is well positioned to capitalize on the increasing demand for data-driven solutions.

Investors looking to invest in AI and defense should consider buying Palantir at its current price as there is further upside potential in the coming years.

PLTR currently has a Zacks Rank #2 (Buy). You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.

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