Palantir Technologies stock was soaring Tuesday. The company's success in getting commercial deals for its analytics software looks to have overridden concerns over future government deals.
Palantir shares were up 18% at $19.80 in premarket trading after fourth-quarter earnings beat expectations.
The software company has been a stock-market darling amid excitement over artificial intelligence but has been hit in recent months by worries raised by some analysts over its relationship with the U.S. Army. That sent the stock down from around $20 at the start of the year to $16 in recent trading.
While Palantir's exposure to federal-government contracts has been the subject of debate, it has consistently argued that the bigger opportunity lies in commercial deals. That looked to be borne out in the latest results as it reported 70% growth in the U.S. commercial business, although its overall revenue remains weighted toward government deals.
"Palantir is capitalizing on its expanded market opportunity with a GTM [go-to-market strategy] that is resonating with customers and the company is set up to continue accelerating growth into 2024 from durable interest in its platform," wrote D.A. Davidson analyst Gil Luria in a research note Tuesday.
Luria raised his target price on Palantir to $19 from $18, although he kept a Neutral rating on the stock.
Palantir's success has made it a standout software stock as investors bet on AI investment moving beyond hardware providers. However, its high valuation might still be an obstacle to winning over Wall Street. The company traded at a price-to-earnings multiple of around 56 times based on its closing price on Monday, according to FactSet.
"Our experts indicate that U.S. commercial is a high-growth opportunity for the company as more enterprises increase their AI investments. Palantir appears to be successfully capitalizing on this AI excitement with its AIP [AI Platform] offering, but the degree to which this initial success translates into long-term growth remains to be seen," Third Bridge analyst Jordan Berger wrote in a research note.