AI: Palantir may be something to pass on, analyst explains
Shares of Palantir (PLTR) are moving up as the company announced it won a contract with the US Army valued at $178 million, to build out TITAN (Tactical Intelligence Targeting Access Node) artificial intelligence-enabled ground stations. The company will deliver 10 prototypes — 5 "basic" and 5 "advanced" — within a 24-month period.
RBC Capital Markets Analyst Rishi Jaluria joins Yahoo Finance to discuss Palantir's contract as well as why he not as bullish as others, despite the hype.
Jaluria does believe Palantir to be a part of the AI hype train but believes there is more at play: "There absolutely is an AI play that they could help enterprises get their data and stay in order for generative AI. But what this is not, this is not a cutting-edge generative AI company. This is not a company that is innovating when it comes to generative AI, and I think when that bridge or gap of what is the message they're communicating to investors, and particularly retail investors, and what is reality, when that starts to narrow, I think we're going to see the stock come back more towards my price target, which I think represents fair value for the company."
For more expert insight and the latest market action, click here to watch this full episode of Yahoo Finance Live.
Editor's note: This article was written by Nicholas Jacobino
Video Transcript
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JOSH LIPTON: Palantir is now going to build 10 AI-powered ground stations. These are battlefield systems that aggregate data from space and terrestrial sensors for long-range precision targeting and other missions. Not everybody, though, is a believer. RBC's Rishi Jaluria rates Palantir underperform. And he joins us now.
Rishi, it is always good to see you on the show. Let's just get right into the reaction, Rishi. This stock is surging about 9% today on that headline. Do you think that move is justified, Rishi?
RISHI JALURIA: Yeah. Thanks so much for having me, Josh. Always a pleasure to chat with you. Look, my perspective is to me the move-up is probably not justified, right? This contract was known-- I've been talking to a lot of my clients about this exact contract, similar size to what was expected. I believe it was contemplated in the guidance that management gave us on the Q4 earnings report.
And look, I look at the stock right now. This company has a bigger market cap than Snowflake, a bigger cap than Atlassian. And I'm not sure that's justified right now.
JULIE HYMAN: Rishi, by the same token, I mean, you've been an underperform on this stock for quite a while here, and it keeps going up. So obviously, you are diverging from the popular perception of Palantir. What would need to change in that perception? Because it seems like the fundamentals are not necessarily going to change. What would need to change to make the Street come to where you are on Palantir?
RISHI JALURIA: Yeah, absolutely. Look, I think you're right. The fundamentals are what they are. This is a company trading at 25 times revenue, growing less than 20%, which is unheard of in software. But look, I think what it takes is recognition that what Palantir claims to be and what they are two different things.
I'm not saying there's no value in this technology. There absolutely is. There absolutely is an AI play that they can help enterprises get their data estate in order for generative AI. But what this is not, this is not a cutting-edge generative AI company. This is not a company that is innovating when it comes to generative AI.
And I think when that bridge of or gap of what is the message they're communicating to investors and particularly retail investors and what is reality, when that starts to narrow, I think we're going to see this stock come back more towards my price target, which I think represents fair value for the company.
JOSH LIPTON: Well, let me ask you just to push on AI, Rishi. How many customers do we know now are using and paying for AIP, the company's AI platform?
RISHI JALURIA: Based on my checks, that answer is very, very few. They talk a lot about boot camps. They talk a lot about AIP. But in our checks where we talk to partners and we talk to industry participants who are working with CIOs of Global 2000 companies, very, very few customers are actually paying for AIP and actively using it.
Are they interested and curious because of all the marketing and messaging around Palantir? Absolutely. Is that real revenue showing up in the model today? No.
