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It has been a difficult year for many software stocks, but Palantir Technologies has stood out. The company’s shares have doubled over the past year, supported by 10 straight quarters of accelerating revenue growth.
Palantir began as a government defense contractor. Its Gotham platform gathers and analyzes data from a wide range of sources to help identify potential threats. The U.S. government remains its largest customer and continues to expand rapidly.
In the most recent quarter, Palantir reported U.S. government revenue of $570 million, up 66% year over year. At the same time, the company’s U.S. commercial business has been the biggest growth driver, with revenue rising 137% last quarter to $507 million.
Palantir’s growth is tied to its Foundry Artificial Intelligence Platform (AIP). The platform gathers data and organizes it into an ontology, linking information to real-world assets and processes. Customers can then apply AI models of their choice. The article notes that AI models require clean, structured data to reduce the risk of incorrect outputs, commonly referred to as “hallucinating,” and positions AIP as an AI operating system.
Despite strong performance, the article highlights that Palantir’s valuation is high. The stock trades at a forward price-to-sales multiple of 51.5 and a forward price-to-earnings ratio of 118, making it difficult to buy at current levels.
The article points to ServiceNow as a comparatively cheaper option. It cites a forward price-to-sales ratio of 8 and a forward price-to-earnings ratio of 30. It also notes that subscription revenue rose 21% last quarter.
ServiceNow has also been affected by the broader SaaS sell-off, with the stock down more than 20% over the past year.
Salesforce is described as another beaten-down SaaS stock. The article says the shares are down more than 25% over the past year, bringing the valuation to a forward price-to-sales multiple of less than 4 and a forward price-to-earnings ratio of 15.
On growth, the article states that Salesforce is expanding revenue in the low double digits and projecting more than 10% compound annual growth through fiscal 2030. It characterizes the stock as a “GARP” (growth at a reasonable price) candidate.
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