A prominent technology analyst says investors may be misreading one of the biggest names in artificial intelligence, just as they once misunderstood Apple (AAPL).
In a new Basis Points interview, Wedbush analyst Dan Ives says investors are focusing too narrowly on the wrong segment of the business when evaluating Palantir (PLTR).
He says the debate is around commercial versus government revenue and the margin differences between the two.
“So my view is the enterprise business versus government, commercial versus government. Commercial, first off, the margins in that are significantly above government.”
Ives draws on Apple’s valuation debate a decade ago, when the company was widely seen as dependent on iPhone sales alone.
“I view it very similarly to my thesis on Apple over the last decade, which people have been saying has been overvalued for a long time. But see, 2014, 2015, I’m going back to like sub a trillion, whatever. It’s like $700 billion.
Our whole view is that you cannot value it just on an iPhone. You have to look at the services business, the margin structure, and almost view it as a sum of the parts.
Now, I think that’s how many have missed Apple in terms of the value creation that we’ve seen over the years. If you just focused on numbers, you weren’t going to see it. It was about the services and what that’s going to do.”
Applying the same framework to Palantir, Ives says the real upside may lie in its commercial AI platform (AIP), not just its government contracts.
“I would equate that to Palantir being the commercial business, commercially, what’s that going to be? What’s AIP going to be? Is it multiple billions? Is it $3, $4, or $5 billion? If my view is that you’re going to have $4 to $5 trillion being spent next three to four years, what percent Palantir is going to get from government and federal?”
While Ives is bullish on Palantir, Big Short investor Michael Burry has made PLTR one of his top targets, predicting that it could plummet to around $50 while placing a $912 million bearish bet on the stock.
At time of publishing, PLTR is worth $131.41.
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