Palantir Technologies(NASDAQ: PLTR) has been one of many hottest shares available on the market in 2024, logging superb good points of 319% as of this writing. The firm’s synthetic intelligence (AI) software program platform has been in terrific demand from clients and governments trying to combine generative AI into their knowledge evaluation.
Palantir’s income development accelerated in current quarters, and its sizable income pipeline means that it might preserve that momentum in 2025 as nicely. However, there may be one drawback 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 must proceed exceeding Wall Street’s expectations quarter after quarter to keep up 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 traders trying to capitalize on the booming generative AI software program market is that there’s a less expensive various to Palantir that they will take into account shopping for straight away.
C3.ai(NYSE: AI) inventory’s returns this yr are nowhere close to Palantir’s, however that is excellent news for traders 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 will probably match Palantir’s monetary development.
C3.ai launched its newest quarterly outcomes on Dec. 9. The firm’s income elevated a formidable 29% yr over yr 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 price noting right here is that C3.ai’s development has been enhancing at a formidable tempo in current quarters. For instance, the corporate reported a 17% year-over-year improve in income within the year-ago quarter, whereas its prime line was up 21% yr over yr within the first quarter of fiscal 2025. This acceleration in C3.ai’s development will 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 virtually in step with the 62 agreements it struck in the identical interval final yr. However, C3.ai managed to win extra enterprise from present clients. As identified by CEO Tom Siebel on the newest 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 initiatives 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 yr 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 observe to complete the present fiscal yr with income development of 25%, although that determine can transfer increased if it will probably convert extra of its pilots into precise clients. For comparability, C3.ai’s prime line elevated by 16% within the earlier fiscal yr. More importantly, analysts have considerably raised their income expectations from the corporate for subsequent yr as nicely.
AI Revenue Estimates for Next Fiscal Year knowledge by YCharts
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 price noting is that Palantir’s income within the earlier quarter elevated by 30% yr over yr. So C3.ai is not lagging far behind in its tempo of development.
Moreover, C3.ai’s full-year income development forecast is in step with the expansion that Palantir is predicted to ship in 2024. Of course, Palantir is a a lot greater firm, however traders must pay a considerably richer valuation in the event that they need to purchase it. So traders who missed out on Palantir’s outstanding surge this yr can nonetheless take into account shopping for C3.ai.
The inventory might ship wholesome good points — assuming C3.ai generates $465 million in income subsequent fiscal yr (as we noticed within the chart earlier) and the market decides to reward it with a better gross sales a number of due to 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 following fiscal yr, its market cap might hit $9.3 billion primarily based on the income estimate mentioned above. That can be a 94% leap 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% improve 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 positively take a more in-depth take a look at C3.ai because it appears poised for a stable 2025.
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Harsh Chauhan has no place in any of the shares talked about. The Motley Fool has positions in 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 coverage.
Missed Out on Palantir? 1 No-Brainer Artificial Intelligence (AI) Stock to Buy Before It Soars in 2025 was initially printed by The Motley Fool
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