Why Palantir Stock Skyrocketed 55.9% Last Month
Palantir (NYSE: PLTR) stock posted explosive gains across February's trading. The company's share price closed out last month up 55.9%, according to data from S&P Global Market Intelligence. Meanwhile, the S&P 500 index climbed roughly 5.2% in the month.
In addition to surging excitement for artificial intelligence (AI) stocks, Palantir reported fourth-quarter results that beat Wall Street's expectations. While the company's non-GAAP (adjusted) per-share earnings of $0.08 were in line with the average analyst estimate, the company's revenue of $608.4 million beat Wall Street's target by roughly $6 million. Even better, Palantir's evolving sales makeup suggests that its strong performance could keep going.
Improving growth powers big gains for Palantir stock
In addition to doubling its adjusted earnings per share on an annual basis in Q4, the company also posted earnings per share of $0.04 on a generally accepted accounting principles (GAAP) basis. The performance represented a dramatic improvement from the per-share earnings of $0.01 it posted in the prior-year quarter and also marked the business's fifth consecutive quarter of GAAP profitability.
Palantir's revenue increased 9% on a sequential quarterly basis and 20% year over year in Q4. Coming on the heels of the 17% year-over-year sales growth the business posted in Q3, last quarter's results delivered another significant growth acceleration. There are signs that the trend is poised to continue.
Palantir's growth could continue to accelerate
Buoyed by demand for the company's Artificial Intelligence Platform (AIP) software suite, sales to private sector customers rose 32% year over year to hit $284 million. Meanwhile, sales to government customers increased 11% year over year to reach $324 million.
While public sector sales still accounted for roughly 53% of overall revenue in Q4, private sector contracts are growing at a much faster rate. Sales to enterprise customers are poised to account for the majority of overall revenue in the very near future, a development that investors should be excited about.
Palantir's fastest-growing segment will also soon be its largest. In turn, this should help total revenue continue to grow at a very healthy clip. Along with the improving margins that the business has been posting lately, this bodes well for near-term and long-term earnings performance.
For the current fiscal year, Palantir is guiding for sales between $2.652 billion and $2.668 billion. At the midpoint of its guidance range, that would mean delivering annual growth of 19% -- an improvement over the 16% annual growth that it posted last year. Additionally, given strong demand indicators for the company's AIP software and other analytics services, it wouldn't be shocking to see the business exceed the high end of management's guidance range.
While Palantir stock fell roughly 0.6% in March's first day of trading, the company's share price is still up approximately 224% over the last year. With its stock trading at roughly 76 times this year's expected earnings, the company has a highly growth-dependent valuation, but the business could be at a major inflection point amid rising demand for artificial intelligence services.
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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.
