Palantir and AppLovin: AI Stocks Poised for Further Gains?
Shares of Palantir Technologies (PLTR) and AppLovin (APP) have experienced substantial growth in recent years, with gains of 925% and 1,910%, respectively, over the past two years. Despite these impressive figures, certain Wall Street analysts believe these artificial intelligence (AI) stocks still have significant upside potential. This article will delve into the latest analyst ratings, financial performance, and potential risks associated with each company to help investors make informed decisions.
Palantir Technologies: Data Analytics and Decision Intelligence
Mark Schappel at Loop Capital recently initiated coverage on Palantir with a target price of $141 per share, implying a 65% increase from its current price of approximately $85. Palantir specializes in data analytics, providing software solutions that help organizations extract meaningful insights from complex information. Its primary products, Gotham and Foundry, are built around an ontology, a framework that maps digital data to real-world objects. This allows users to query the ontology and uncover valuable insights for improved decision-making.
Last year, Palantir was recognized as the market leader in decision intelligence software by International Data Corporation (IDC) and also earned a leadership position in AI platforms from Forrester Research.
Palantir’s fourth-quarter financial results showcased growing demand for its AI platform. Customer numbers increased by 43% to 711, and existing customers increased their spending by 20%. Revenue grew by 36% to $828 million, marking the sixth consecutive quarter of accelerated growth, and non-GAAP net income rose 75% to $0.14 per diluted share. Management anticipates a 36% revenue increase in the first quarter. Despite these positive results, Palantir’s stock price has fallen over 30% from its peak near $125 in February. Company-specific factors, such as concerns about insider selling, and broader market uncertainty have contributed to this decline.
Wall Street projects a 36% increase in Palantir’s earnings for 2025. However, with IDC forecasting the AI platform sales to grow annually at 40% in the coming years, this may be a conservative estimate. The current valuation of 200 times adjusted earnings appears expensive, even if Palantir’s earnings were to grow at twice the consensus rate. Investors seeking an entry point should potentially consider waiting for a more favorable opportunity based on future performance and potential market adjustments.
AppLovin: AdTech Software and Mobile Game Development
Rob Sanderson at Loop Capital has raised his target price on AppLovin to $650 per share, representing a 140% increase from its current value of approximately $270. AppLovin is focused on providing adtech software that helps developers market and monetize mobile applications. Its core products, AppDiscovery and Max, leverage AI to connect advertisers with publishers.
AppLovin’s development studio creates mobile games, monetizing them through in-app purchases and advertising. The company intends to divest this segment for $900 million, allowing it to concentrate on advertising software, including its new adtech product for e-commerce companies.
AppLovin reported strong financial results in the fourth quarter, exceeding expectations in both revenue and profitability. Revenue increased by 44% to $1.4 billion. GAAP net income grew 253%, reaching $0.49 per diluted share. These results reflect strong sales growth in the adtech business. In February, AppLovin was targeted by short-seller reports, which alleged various fraudulent activities, creating uncertainty for investors. However, analysts at BTIG and Piper Sandler view the subsequent sell-off as a buying opportunity.
AppLovin CEO Adam Foroughi has addressed the short-seller claims, emphasizing the company’s AI models and commitment to enhancing advertising for its partners. Wall Street anticipates that AppLovin’s earnings will increase by 45% in 2025, which makes the current valuation of 57 times anticipated earnings look reasonable. Risk-tolerant investors with a three-year investment horizon might find AppLovin’s current situation appealing.
Conclusion
Both Palantir and AppLovin represent compelling opportunities in the burgeoning AI market, though their growth potential is subject to market volatility. Palantir’s data analytics solutions and AppLovin’s adtech platform each demonstrate strong growth and address significant market needs. Before making investment decisions, consider the current valuation and the potential risks like those associated with the short-seller reports for AppLovin. The AI sector’s long-term prospects remain robust, although the pace of gains will depend on various factors, including innovation and broader economic conditions.
