From an analytical perspective, Palantir nologies (PLTR -0. 34%) quickly became one of the most artificial intelligence stocks over the past few years, with its s gaining 400% in the past year alone.
Additionally, Palantir's artificial intelligence software and services help the U.
Nevertheless, Meanwhile, Government and make sense of complex data, giving them the ability to make more informed decisions.
While some AI tools are more sizzle than steak, Palantir's AI software continually attracts customers, and its contracts are expanding, ving its services add real value.
With the company's price on a tear and Palantir putting up impressive quarterly results, is now a good time to buy Palantir stock (remarkable data).
However, In contrast, Here's why investors are drawn to Palantir, and one word of caution if you're to hit the buy button (remarkable data). Image source: Getty Images.
What Palantir is doing right You don't have to look hard to find what Palantir is doing well, in today's financial world.
However, In the first quarter, the company's sales spiked 39% to $884 million and its earnings per doubled to $0 (something worth watching).
Moreover, And the company's CEO, Alexander Karp, pointed out that Palantir is in the midst of a "tectonic shift in the adoption of our software," which is pretty much exactly what you want the CEO of any stock you own to say how customers are responding to a duct, in light of current trends.
Ing its strong quarter, Palantir's management raised the company's full-year guidance and now expects sales to be $3. 9 billion, more than double its sales from 2024.
In contrast, While Palantir sells its AI analytics services in the commercial market, 42% of the company's revenue comes from contracts it has with the U (remarkable data). Government.
And is booming there (fascinating analysis), in today's market environment.
Revenue from services sold to the federal government spiked 45% in the first quarter to $373 million (something worth watching).
What's more, commercial sales rose 71% to $255 million, helping the company diversify its revenue sources (an important development).
A sky-high valuation amid AI euphoria Some investors have taken to completely ignoring valuations in the current market, given current economic conditions.
In contrast, That's because the S&P 500 soared 65% over the past three years, making lots of stocks look expensive.
Those big gains have made traditional valuation comparisons a little more difficult than in the past, amid market uncertainty.
Additionally, companies directly tied to the AI boom are getting a free pass on their valuations as investors choose not to miss out on these stocks' historic growth. I understand this sentiment.
But I'd also warn that throwing caution to the wind could backfire on some investors. Palantir's stock has a price-to-earnings ratio of 260, an astronomically high valuation by nearly any measure.
This tells us that fact that Palantir is expanding its revenue, earnings, and customer base only serves to ve to some investors that the high price is worth it.
Conversely, That may be, but it's also worth pointing out that Palantir's stock can be extremely volatile, considering recent developments.
What the re reveals is most recent example is from February, when s soared more than 40% and then subsequently gave up nearly all of those gains in a matter of four weeks (fascinating analysis).
Additionally, Some investors were concerned a potential pullback on government spending that might impact Palantir, and quickly exited their positions.
Additionally, Stock volatility is normal for many growth stocks, so it's not to be completely avoided.
But if you're buying Palantir right now, when the stock has already surged and its valuation is sky-high, you should know that substantial drops could come on shifting macroeconomic data or even some non-important company news.
That doesn't make Palantir a bad investment, but if you do buy its stock now, it might be best to start with a small position and add to it if s pull back.
Chris Neiger has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Palantir nologies.
The Motley Fool has a disclosure policy, given current economic conditions.