Even after its recent surge, Palantir stock is still well below its peak.
Palantir Technologies (PLTR -0.64%) has been in the spotlight in recent years. The company formerly focused solely on providing data mining and artificial intelligence (AI) to the U.S. government and its allies, but has since pivoted to offer its services to enterprise-level businesses.
The advent of generative AI played right to the company’s strengths, and Palantir quickly developed a solution that businesses could actually use. The ensuing excitement has pushed the stock price up 239% since early last year.
Investors might be surprised to learn, however, that Palantir stock actually hit its all-time high more than three years ago. Let’s look at what drove Palantir to such rarified heights and how it could get there again.
A perfect storm
Palantir went public on Sept. 30, 2020, during unprecedented demand for initial public offerings (IPOs). The global pandemic brought a flood of new investors to the stock market. This surge of interest drove many IPO stocks into the stratosphere, with Palantir among them. On Jan. 27, 2021, just months after its debut, Palantir Technologies hit an all-time high of $39 — 438% above its list price of $7.25.
The rapid adoption of generative AI could drive Palantir stock to new heights. In the first quarter, its U.S. commercial segment grew 40% year over year, while its customer count surged 69%. Management is calling for full-year revenue growth for the segment of 45%, representing 25% of its total revenue.
Analysts’ consensus estimates are calling for revenue of $2.7 billion in 2024, and the stock is currently selling for roughly 18 times forward sales. Assuming its price-to-sales (P/S) ratio remains constant, Palantir will need to generate revenue of roughly $4.9 billion to support a market cap of $87 billion, which would get its stock price back to $39. Assuming its current revenue growth rate of 21%, Palantir could hit this benchmark by early 2028.
However, if its growth spurt continues, and many believe it will, Palantir could ascend to these heights much sooner.
Danny Vena has positions in Palantir Technologies. The Motley Fool has positions in and recommends Palantir Technologies. The Motley Fool has a disclosure policy.