Chicago, IL – February 21, 2025 – Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include: Palantir Technologies Inc. PLTR, C3.ai, Inc. AI, Microsoft Corp. MSFT and Alphabet Inc. GOOGL.
Software-as-a-service (SaaS) company Palantir Technologies Inc.’s shares have soared 388.7% in the past year, a noteworthy comeback after the stock took a beating in its initial public offering.
Another SaaS company, C3.ai, Inc., providing AI-based applications, has become a Wall Street darling as it continues to get a lot of business from the government. C3.ai’s shares have gained 17.5% in the past year, with further potential based on recent accelerated revenue growth increases. Does this mean C3.ai can rival Palantir, and is the stock a buy? Let’s delve into it –
Palantir ended last year with revenues of $2.87 billion, up 29% from the prior year. Palantir’s top line improved as more customers began to use the Artificial Intelligence Platform (AIP), which can automate tasks surpassing human capabilities.
AIP’s popularity has lured both new and existing customers. The net dollar retention rate in the fourth quarter of 2024 increased, indicating that current customers are spending more on Palantir’s products.
With existing customers generating substantial business for Palantir, the company needs to spend less on revenue generation, resulting in strong growth margins. Palantir’s adjusted operating income did improve last year.
While Palantir’s total contract value shot up in the fourth quarter of 2024, its remaining deal value (RDV) climbed 40% to $5.4 billion from a year ago. Palantir’s growth is likely to accelerate this year, with RDV exceeding last year’s revenues.
The company also anticipates further growth due to increasing demand for AI software to enhance productivity. Analysts expect spending on AI software worldwide to jump fourfold between the current year and 2030, generating billions in annual revenues.
C3.ai’s revenues soared 29% year over year to $94.3 million in the fiscal second quarter as the company’s ready-to-use AI programs were appreciated by its current customers. C3.ai generated most of its income from subscriptions, reflecting strength through recurring revenues.
C3.ai’s strategic alliances are also driving business growth. C3.ai is now the most sought-after AI application of Microsoft Corp.’s Azure cloud services. C3.ai also has a tie-up with Alphabet Inc.-owned Google Cloud, which could help the company scale its business and improve profit margins. Due to these partnerships, C3.ai aims for revenue growth of 22% to 28% for the current year.
Palantir presently trades at almost 110 times sales, a massive premium. However, Palantir is well-positioned to justify its sky-high valuation as the company expects to beat future estimates, given its steady rise in customer bases, contract increase and RDV jump. Meanwhile, any defense budget cuts under the Trump administration could cause short-term volatility in Palantir stock.
On the other hand, despite a solid partner network, C3.ai hasn’t been able to report profit. In reality, the company expects an adjusted operating loss of $105 million to $135 million for fiscal 2025. But Palantir already posted a profit last year. Thus, concluding that C3.ai will be the next Palantir is premature.
Risk-tolerant investors, meanwhile, may buy the C3.ai stock based on revenue growth, varied alliances and diversification into new sectors for potential profitability. Risk-averse investors may adopt a wait-and-watch approach.
For the moment, C3.ai has a Zacks Rank #3 (Hold). Palantir has a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 (Strong Buy) Rank stocks here.
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