stock price Palantir Technologies (NYSE:PLTR) and snowflake (New York Stock Exchange: Snow) Thanks to Wall Street's reaction to its recent quarterly results, the company will be headed in a different direction in 2024.
Palantir Technologies' stock price soared impressively last month following its 2023 fourth-quarter results, as investors praised the company's growing influence in the artificial intelligence (AI) software market. Snowflake's stock price fell like a rock after the cloud-based data platform provider failed to back up its solid quarterly results with solid guidance.
Does this mean Palantir is a good stock to buy now, especially given the AI ​​tailwinds? Or does this mean that Snowflake stock is a smart move to capitalize on the AI ​​data opportunity? Should we consider taking advantage of the drop in share prices since it looks like we're in the market? Let's find out.
Palantir Technologies Case Study
Palantir Technologies stock is up an impressive 37% year-to-date in 2024, as the company's AI software platform has seen solid adoption by both commercial and government customers. Management also expects growth to accelerate this year.
Palantir ended 2023 with sales up 17% to $2.23 billion. Management expects 2024 sales to be $2.66 billion at the midpoint of its guidance range, representing a 19% increase over last year. But don't be surprised if Palantir ends the year with stronger revenue growth.
The company recently awarded another government contract to enhance the U.S. Army's AI capabilities. Additionally, the company will gain more commercial customers for its Artificial Intelligence Platform (AIP) solutions by conducting boot camps that will help customers understand how to improve their operations with the help of his AI. It is being actively introduced into the market for this reason.
These bootcamps will allow Palantir to accelerate new customer acquisition and help close deals quickly, management said on the company's February earnings call. More specifically, Palantir “more than doubled the number of U.S. commercial deals with contract totals of at least $1 million” compared to the same period last year.
Palantir's management team is now “focused on how to translate the bootcamp into enterprise deals.” According to Bloomberg Intelligence, the generative AI software market is expected to grow from just $1.5 billion in annual revenue in 2022 to $59 billion in annual revenue in 2027, and Palantir's AI-related growth is just beginning. It is.
Consensus forecasts predict that the company's revenue growth will accelerate in the coming years.
For snowflake
Snowflake's cloud platform allows customers to consolidate their data into one platform. You can use that data to build applications, gain insights, and more. The company ended its 2024 fiscal year (ending January 31, 2024) with impressive growth in product revenue of 38% to his $2.67 billion. However, Snowflake's 2025 product revenue outlook is $3.25 billion, representing 22% year-over-year growth, suggesting a slowdown.
Perhaps this is why investors hit the panic button. However, Snowflake appears to be cautious with its guidance, given that customers are being measured on how much they spend on the company's services. Investors may want to take advantage of this pullback, as the company's AI efforts and other metrics suggest it could end fiscal 2025 with stronger growth.
The company offers a fully managed AI platform known as Snowflake Cortex. Snowflake says that through the platform, “users of all skill sets can now access industry-leading AI models, LLM, and vector search capabilities for a complete LLM-powered experience.” says.
Cortex customers will no longer need to invest in expensive equipment to build custom AI applications using data stored on Snowflake's platform. Snowflake now offers multiple AI-focused tools that enable Cortex customers to extract information from their data, summarize long documents, translate text, and identify outliers in their data. It's worth noting that there are.
Snowflake says it will invest $50 million in graphics processing units (GPUs) this year to enhance its AI capabilities. The AI-as-a-Service market it is trying to tap is expected to grow from just $11 billion in annual revenue in 2023 to $179 billion in 2032, according to market research firm Imark. , this is a wise move.
Snowflake ended the last fiscal year with $5.2 billion worth of performance obligations, an increase of 41% from the previous year. This metric refers to “the amount of future contracted revenue that has not yet been recognized,” and its solid growth indicates that Snowflake has a strong revenue pipeline that will help it grow at a faster pace. I am. Additionally, the company's focus on strengthening its AI-focused products could further expand its revenue pipeline and sustain impressive long-term growth.
verdict
Snowflake grew faster than Palantir last year. However, since Snowflake's Cortex platform is not yet generally available to customers, it remains to be seen whether Palantir's AI products can repeat that feat this year, as they are already gaining momentum. However, this valuation may give investors food for thought.
Palantir trades at a pricey 24 times sales, while Snowflake is relatively cheap at a price-to-sales ratio of 18. The story is similar when you consider forward sales multiples.
This means that Snowflake stock has become relatively attractive following the recent decline. Of course, Snowflake's AI business hasn't taken off yet, but thanks to its strong customer base of over 9,400 people who can cross-sell its generative AI products, the company could advance quickly in that space.
So investors unsatisfied with Palantir's valuation after its recent rally could take a closer look at Snowflake. In the long term, AI may become a strong option.
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Harsh Chauhan has no position in any stocks mentioned. The Motley Fool has a position in and recommends Palantir Technologies and Snowflake. The Motley Fool has a disclosure policy.
“Better Artificial Intelligence (AI) Stocks: Palantir Technologies vs. Snowflake” was originally published by The Motley Fool.