Shares of Palantir (PLTR 23.99%) were flying higher on Tuesday. They gained 22.8% as of 3:40 p.m. ET but were up as much as 27.7% earlier in the day. The leg up comes as the S&P 500 gained 0.7% and the Nasdaq composite gained 1.3% on the day.
Palantir, which provides AI-driven intelligence to commercial and government clients, reported earnings Monday after the closing bell.
The numbers
Palantir reported huge growth, handily beating Wall Street’s expectations. The company delivered earnings per share (EPS) of $0.14 on $828 million in revenue. That beat the $0.11 on $776 million expected by analysts.
CEO Alex Karp, known for his bold pronouncements, said of the sales momentum that it was “unlike anything that has come before” and that he believes Palantir will lead a “revolution in the U.S. over the next three to five years.”
The company’s performance led several analysts to raise their price targets, including analysts from Bank of America and Morgan Stanley.
There’s a bit of a valuation problem
There is no denying the company has a lot of momentum and is continuing to deliver incredible growth. However, it still remains to be seen if the company can justify the enormous premium it carries. Palantir stock trades at a whopping 440 times earnings. That is likely not a valuation it can carry for long, and if its growth begins to level off, its stock could take a big hit as gravity takes effect.
Johnny Rice has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Palantir Technologies. The Motley Fool has a disclosure policy.
