Palantir Technologies(NASDAQ:PLTR) has been one of the hottest stocks on the market in 2024, posting incredible gains of 319% as of this writing. The company’s artificial intelligence (AI) software platform is in high demand among customers and governments seeking to integrate generative AI into their data analysis.
Palantir Revenue Growth accelerated over the past few quarters, and its sizable revenue pipeline suggests it could carry that momentum into 2025 as well. However, there’s one problem with Palantir stock right now: its assessment. The stock trades at 67 times sales and 372 times current earnings.
This clearly shows that Palantir is not a value stock. More importantly, the AI software specialist will need to continue to exceed Wall Street expectations quarter after quarter to maintain its stock market surge. Palantir’s valuation is now so high that the 12-month median price target of $38, according to 20 analysts, suggests a 48% decline from current levels.
The good news for investors looking to capitalize on the booming generative AI software market is that there is a much cheaper alternative to Palantir that they can consider purchasing immediately.
C3.ai(NYSE:IA) The stock’s returns this year are nowhere near Palantir’s, but that’s good news for investors because they can be purchased at a much cheaper valuation. But more importantly, C3.ai’s growth in the second quarter of fiscal 2025 (which ended October 31) shows that it can match Palantir’s financial growth.
C3.ai released its latest quarterly results on December 9. The company’s revenue increased 29% year over year to $94.3 million, which was well above the consensus estimate of $91 million. Additionally, C3.ai’s net loss narrowed to $0.06 per share from $0.13 per share a year ago. Analysts had expected a wider loss of $0.16 per share.
The important thing to note here is that C3.ai’s growth has been improving at an impressive rate over the past few quarters. For example, the company saw a 17% year-over-year increase in revenue in last year’s quarter, while its revenue grew 21% in year-over-year in the first quarter of fiscal 2025. This acceleration in C3.ai’s growth can be attributed to an increase in the number of customer contracts signed by the company.
Specifically, C3.ai closed 58 customer deals during the last quarter, which is almost in line with the 62 deals closed during the same period last year. However, C3.ai managed to gain more business from existing customers. As CEO Tom Siebel noted during the latest earnings conference call, the company has entered into new and expanded agreements with ExxonMobil, Coke, Dow, Holcim, Shell, Duke Energy, Boston Scientist, Rolls-Royce, Caméco, March, ESABand Flex and Worley, among others.
C3.ai’s AI software offerings are also gaining traction with federal customers. The company has entered into new and expanded agreements with the U.S. Department of Defense, U.S. Air Force, U.S. Navy, U.S. Army, U.S. Marine Corps, Defense Logistics Agency and the Chief Digital Artificial Intelligence Office , among others.
C3.ai also participated in 36 pilot projects last quarter. So there is a good chance that it can win more contracts in the future and continue to grow at a healthy pace. The company also raised its guidance for fiscal 2025 and now expects to end the year with revenue of $388 million at the midpoint, up from the previous midpoint of $382.5 million. dollars.
The updated revenue forecast means the company is on track to finish the current fiscal year with revenue growth of 25%, although that figure could rise if it can convert more of its pilots into actual customers . For comparison, C3.ai’s revenue grew 16% in the previous fiscal year. More importantly, analysts also significantly increased their expectations for the company’s revenue for next year.
We’ve already seen how expensive Palantir stock is right now, 67 times higher than sales. C3.ai, for comparison, trades at a much lower price-to-sales ratio of 15. Another thing to note is that Palantir’s revenue in the previous quarter was up 30% year over year. the other. C3.ai is therefore not left behind in its rate of growth.
Additionally, C3.ai’s full-year revenue growth forecast is in line with the growth Palantir is expected to achieve in 2024. Of course, Palantir is a much larger company, but investors will have to pay a significantly higher valuation if they want to buy it. So, investors who missed out on Palantir’s remarkable rise this year can still consider buying C3.ai.
The stock could generate healthy gains – assuming C3.ai generates $465 million in revenue for the next fiscal year (as we saw in the previous chart) and the market decides to reward it with a sales multiple higher thanks to its improving growth profile and premium. ordered by his colleague specializing in AI software.
Assuming C3.ai trades at even 20 times sales at the end of the next fiscal year, its market cap could reach $9.3 billion based on the revenue estimate discussed above. This would represent a 94% jump from current levels. Even a sales multiple of 15 would result in a market cap of $7 billion, which would represent a 46% increase from current levels.
Investors looking to add an AI stock to their portfolios that is significantly cheaper than Palantir but matches its growth can definitely take a closer look at C3.ai as it looks poised for a strong 2025.
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Hard Chauhan has no position in any of the stocks mentioned. The Motley Fool ranks and recommends Palantir Technologies. The Motley Fool recommends C3.ai, Cameco, Duke Energy, Marston’s Plc and Rolls-Royce Plc. The Motley Fool has a disclosure policy.
