Jim Cramer maintained his bullish view of Palantir Technologies Inc. (NASDAQ:PLTR) during Mad Money on October 1. Discussing its third-quarter stock performance, he commented:
On the first day of a brand new quarter, October 1, you need a compass. You know what provides you the best compass? What can navigate you the best? Last quarter… We all use S&P 500 as our benchmark in this business. Now, the index finished up 2.03% for the third quarter. Not bad, not great… Finally, there’s Palantir, also up 60%. I believe in these guys. They’re among the fastest growers with great gross margins and smart, tough leadership. I’ve been using a $250 price target. I’ve been too aggressive so far. The stock got as high as $207 and then it got walloped. It is now back to $190 where I would still buy Palantir.
Cramer recently likened Palantir to an NFL Wide Receiver ~a high-risk, high-reward growth stock that can deliver explosive upside.
Commercial AI Demand Extends The Expansion
Palantir Technologies Inc. reported second-quarter revenue of approximately $1.94 billion, up 93% year-over-year. U.S. commercial revenue increased 149% to $764 million, while U.S. government revenue rose 90% to $809 million. The company generated $912 million in GAAP operating income, representing a 47% operating margin.
Following those results, management raised its full-year revenue forecast to $8.150 billion to $8.158 billion and its adjusted free cash flow outlook to $4.5 billion to $4.7 billion. The company also announced a partnership with Nebius on September 8 to give commercial customers access to additional AI computing infrastructure. Following integration, eligible customers will be able to use Nebius computing and inference services within Palantir’s enterprise environment. The companies also plan to accelerate capacity deployment, including through modular data centers at locations with available power.
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A Steep Multiple And Limits To Contract Visibility
Palantir Technologies Inc.’s valuation remains a concern despite its rapid expansion. The company trades at approximately 100x forward earnings (depending on sources and different estimates), compared with <20x for the S&P 500.
Contract announcements also require careful interpretation. Palantir states that its total contract value and remaining deal value assume customers exercise their options and do not terminate agreements. Most contracts contain termination provisions, including termination for convenience, so these measures do not represent guaranteed future revenue. The company additionally identifies lengthy sales cycles and complex implementations as operating risks.
Michael Burry’s criticism of the company also recently resurfaced.
Fund Participation Falls Despite The Rally
The number of hedge funds invested in Palantir Technologies Inc. declined to 86 in Q2 from 96 in the previous quarter, according to Insider Monkey’s tracking of more than 1,000 funds. Separately, short interest amounted to 2.80% of the public float as of mid-September.
Cramer remains willing to buy after the stock’s pullback. Palantir’s reported growth and profitability provide evidence for his enthusiasm, although the shares continue to command a considerable premium to the enterprise software comparison.
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