Palantir Technologies (PLTR 3.92%) has been one of many hottest shares available on the market in 2024, logging wonderful positive aspects of 319% as of this writing. The firm’s synthetic intelligence (AI) software program platform has been in terrific demand from clients and governments seeking to combine generative AI into their knowledge evaluation.
Palantir’s income development accelerated in latest quarters, and its sizable income pipeline means that it might preserve that momentum in 2025 as nicely. However, there may be one downside with Palantir inventory proper now — its valuation. The inventory trades at a whopping 67 occasions gross sales and 372 occasions trailing earnings.
This makes it clear that Palantir is not any worth inventory. More importantly, the AI software program specialist should proceed exceeding Wall Street’s expectations quarter after quarter to take care of its red-hot inventory market rally. Palantir’s valuation is now so costly that the inventory’s median 12-month worth goal of $38, as per 20 analysts, factors towards a 48% draw back from present ranges.
The excellent news for buyers seeking to capitalize on the booming generative AI software program market is that there’s a less expensive different to Palantir that they’ll think about shopping for straight away.
C3.ai faucets into the fast-growing enterprise AI software program market
C3.ai (AI 3.16%) inventory’s returns this 12 months are nowhere close to Palantir’s, however that is excellent news for buyers as it may be purchased at a less expensive valuation. But extra importantly, C3.ai’s development within the second quarter of fiscal 2025 (which ended on Oct. 31) reveals that it may possibly match Palantir’s monetary development.
C3.ai launched its newest quarterly outcomes on Dec. 9. The firm’s income elevated a formidable 29% 12 months over 12 months to $94.3 million, which was nicely above the consensus estimate of $91 million. Additionally, C3.ai’s bottom-line loss shrank to $0.06 per share from $0.13 per share within the year-ago interval. Analysts had been anticipating a much bigger lack of $0.16 per share.
The essential factor value noting right here is that C3.ai’s development has been enhancing at a formidable tempo in latest quarters. For instance, the corporate reported a 17% year-over-year enhance in income within the year-ago quarter, whereas its high line was up 21% 12 months over 12 months within the first quarter of fiscal 2025. This acceleration in C3.ai’s development might be attributed to a rise within the variety of buyer agreements that the corporate is signing.
More particularly, C3.ai struck 58 buyer agreements final quarter, which was nearly in keeping with the 62 agreements it struck in the identical interval final 12 months. However, C3.ai managed to win extra enterprise from present clients. As identified by CEO Tom Siebel on the most recent earnings convention name, the corporate has entered new and expanded agreements with ExxonMobil, Coke, Dow, Holcim, Shell, Duke Energy, Boston Scientific, Rolls-Royce, Cameco, Mars, ESAB, and Flex and Worley, amongst others.
C3.ai’s AI software program choices are gaining traction amongst federal clients as nicely. The firm 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, the Defense Logistics Agency, and the Chief Digital Artificial Intelligence Office, amongst others.
C3.ai was additionally engaged in 36 pilot tasks final quarter. So there’s a good likelihood that it might win extra contracts going ahead and continue to grow at a wholesome tempo. The firm has additionally raised its fiscal 2025 steerage and now expects to finish the 12 months with $388 million in income on the midpoint, up from the sooner midpoint of $382.5 million.
The up to date income steerage signifies that the corporate is on monitor to complete the present fiscal 12 months with income development of 25%, although that determine can transfer larger if it may possibly convert extra of its pilots into precise clients. For comparability, C3.ai’s high line elevated by 16% within the earlier fiscal 12 months. More importantly, analysts have considerably raised their income expectations from the corporate for subsequent 12 months as nicely.
AI Revenue Estimates for Next Fiscal Year knowledge by YCharts
The valuation makes C3.ai inventory a stable purchase
We have already seen how costly Palantir inventory is true now at 67 occasions gross sales. C3.ai, for comparability, is buying and selling at a a lot decrease price-to-sales ratio of 15. Another factor value noting is that Palantir’s income within the earlier quarter elevated by 30% 12 months over 12 months. So C3.ai is not lagging far behind in its tempo of development.
Moreover, C3.ai’s full-year income development forecast is in keeping with the expansion that Palantir is anticipated to ship in 2024. Of course, Palantir is a a lot larger firm, however buyers should pay a considerably richer valuation in the event that they need to purchase it. So buyers who missed out on Palantir’s outstanding surge this 12 months can nonetheless think about shopping for C3.ai.
The inventory might ship wholesome positive aspects — assuming C3.ai generates $465 million in income subsequent fiscal 12 months (as we noticed within the chart earlier) and the market decides to reward it with a better gross sales a number of because of its enhancing development profile and the premium that its fellow AI software program specialist is commanding.
Assuming C3.ai is buying and selling at even 20 occasions gross sales on the finish of the subsequent fiscal 12 months, its market cap might hit $9.3 billion primarily based on the income estimate mentioned above. That could be a 94% soar from present ranges. Even a gross sales a number of of 15 would translate to a $7 billion market cap, which might be a 46% enhance from present ranges.
Investors trying so as to add an AI inventory to their portfolios that is considerably cheaper than Palantir however is matching its development can undoubtedly take a better have a look at C3.ai because it appears poised for a stable 2025.
