Shares of Palantir Technologies (NASDAQ: PLTR) and AppLovin (NASDAQ: APP) have soared 925% and 1,910%, respectively, in the last two years. However, certain Wall Street analysts still anticipate more gains in the coming months.
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Mark Schappel at Loop Capital recently initiated coverage on Palantir with a target price of $141 per share. That implies a 65% upside from the current share price of $85.
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Rob Sanderson at Loop Capital recently raised his target price on AppLovin to $650 per share. That implies a 140% upside from its current share price of $270.
Here’s what investors should know about these artificial intelligence stocks.
Palantir specializes in data analytics. Its primary software products, Gotham and Foundry, let organizations make sense of complex information. The company says its key differentiator is software built around an ontology, a framework that maps digital data to real-world objects. Users can query the ontology to surface insights that improve decision-making.
Last year, International Data Corporation (IDC) recognized Palantir as the market leader in decision intelligence software. The company was also ranked as a leader in artificial intelligence (AI) platforms by Forrester Research. “Palantir is quietly becoming one of the largest players in this market,” wrote analyst Mike Gualtieri.
Palantir reported stellar fourth-quarter financial results amid growing demand for its AI platform. Customers increased 43% to 711, and the average existing customer spent 20% more. Revenue climbed 36% to $828 million, the sixth sequential acceleration, and non-GAAP (generally accepted accounting principles) net income rose 75% to $0.14 per diluted share. Management guided for 36% revenue growth in the first quarter.
Palantir stock peaked near $125 per share in February but has since fallen more than 30%. Company-specific factors contributing to that drop include concerns about insider selling and possible Pentagon budget cuts. However, economic uncertainty created by the Trump administration’s whipsawing on trade policy has also dragged the broader market down.
Wall Street forecasts Palantir’s earnings will increase 36% in 2025, perhaps a bit low, given that IDC expects AI platform sales to grow at 40% annually in the next few years. But the current valuation of 200 times adjusted earnings would look expensive even if Palantir’s earnings were to grow twice as fast as the consensus. So, I think investors should wait for a better entry point before buying shares.
AppLovin provides adtech software that helps developers market and monetize their mobile applications. Its primary products, AppDiscovery and Max, lean on artificial intelligence to match advertisers with publishers (companies that own digital ad inventory). The former helps developers acquire new users, and the latter helps developers monetize their apps by selling advertising inventory.
AppLovin also owns a development studio that designs mobile games, which are monetized through in-app purchases and advertising. However, the company plans to divest that portion of its business for $900 million. Doing so will allow AppLovin to focus solely on advertising software, including its nascent adtech product for e-commerce companies.
AppLovin reported strong financial results in the fourth quarter, trouncing estimates on the top and bottom lines. Revenue increased 44% to $1.4 billion, profit margin expanded 25 percentage points, and GAAP net income increased 253% to $0.49 per diluted share. Those results reflect robust sales growth in the adtech business, offset by a sales decline in the apps business.
In February, AppLovin was targeted by withering reports from short-sellers Culper Research and Fuzzy Panda Research, which accused the company of various fraudulent activities, including stealing data and illegally tracking childrens’ accounts. Those reports create risk for investors, but BTIG analysts said the claims lack merit, and Piper Sandler analysts see the subsequent sell-off as a buying opportunity.
AppLovin CEO Adam Foroughi rebutted, “It’s disappointing that a few nefarious short-sellers are making false and misleading claims aimed at undermining our success and driving down our stock price for their own financial gain, rather than acknowledging the sophisticated AI models our team has built to enhance advertising for our partners.”
Wall Street expects AppLovin’s earnings to increase 45% in 2025, making the current valuation of 57 times earnings look reasonable. Risk-tolerant investors with a time horizon of at least three years should consider buying a position today. But I am skeptical about triple-digit returns, at least until the uncertainty created by the short-seller reports has dissipated.
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Trevor Jennewine has positions in Palantir Technologies. The Motley Fool has positions in and recommends AppLovin and Palantir Technologies. The Motley Fool has a disclosure policy.
2 Monster AI Stocks Up 925% and 1,910% in 2 Years to Buy Now, According to Wall Street Analysts was originally published by The Motley Fool