Palantir Stock: Buy, Sell, or Hold?

Despite its massive run-up this year, perhaps no company is quite as divisive among investors at the moment as Palantir Technologies (NYSE: PLTR). The share price for this tech stock, which was just added to the S&P 500, has more than doubled this year and was among the market's top performers last quarter.

Given that strong performance, it is no surprise that many investors wonder if Palantir stock is a buy, sell, or hold. Let's look at the cases for each.

The buy case for Palantir

While Nvidia has been the biggest artificial intelligence (AI) beneficiary on the hardware side, Palantir has the opportunity to be among the biggest beneficiaries on the software side. The company already established itself as one of the top analytics providers in the world by helping the U.S. government fight terrorism and track the spread of COVID-19 during the pandemic.

Its new Artificial Intelligence Platform (AIP) expanded the use cases for Palantir's technologies and is being rapidly adopted by commercial customers. The company is getting wins from clients across various industry verticals, including healthcare, insurance, energy, industrials, restaurants, and retailing. The breadth of the industries Palantir is serving is impressive, as AIP helps customers build AI apps, actions, and agents to solve complex problems. AIP also has out-of-the-box AI solutions as well as starter packs and templates that can be customized if needed.

The company is seeing impressive growth in its U.S. commercial segment, with revenue growing 55% year over year last quarter, as it brings in new customers through its boot camps. These five-day camps help potential customers understand how to apply AI to crucial operations. The strategy is working as U.S. commercial customers grew by 83% year over year in the second quarter.

Moving all these new customers from the prototypes they create in its boot camps to production is Palantir's biggest opportunity. The company is already seeing solid net dollar retention, up 114% last quarter, but that number does not reflect the new customers it has added in the past year with its boot camps. Palantir said this transition has been very difficult for most companies but that it has been able to do so smoothly, as demonstrated by a recent expansion with Tampa General Hospital.

The "expand" part of Palantir's land-and-expand strategy is about to really kick in and help accelerate growth in the future.

Meanwhile, Palantir continues to win new U.S. government contracts, which should help reaccelerate growth from its largest client. These include a $99.8 million deal over the next five years for the military to use its AI-powered Maven Smart System to help improve battlefield awareness.