With its share price up roughly 685% over the last 18 months, investors want to know: Is it too late to buy Palantir Technologies (PLTR 2.86%) stock?
My answer? No, there’s still time. Here’s why.
Palantir’s exact total addressable market is uncertain, but it’s huge
For growth stocks, one of the key measures of growth potential is total addressable market (TAM). This figure represents the total revenue opportunity that a company could serve with its products or services.
It’s difficult to pin down an accurate TAM for Palantir for one big reason: Artificial intelligence (AI) is a cutting-edge technology, and breakthroughs are frequent. Therefore, establishing what tasks AI can do — or will be able to do — is hard to say. Thus, it’s even harder to quantify what organizations might be willing to pay for AI-powered services.
Nevertheless, many analysts have tried to estimate Palantir’s TAM. In short, I’ve seen estimates of Palantir’s TAM reaching $1.4 trillion by 2033.
That’s an enormous figure, and it is far from a certainty. However, one thing is clear: Analysts agree that Palantir’s TAM is massive. Even the most conservative estimates, released by the company in 2020, were for a TAM of $120 billion.
Image source: Getty Images.
Palantir has a long way to go before reaching its TAM
Over the last 12 months, Palantir generated about $3.1 billion in revenue. Granted, its revenue is growing quickly — 39% year over year. But even at its current fast pace, it would take the company more than a decade to hit $100 billion in annual revenue.
The good news here for investors is that Palantir still has a massive amount of room to grow into its TAM. Furthermore, if the higher-end estimates prove correct, it’s possible that Palantir’s growth could move faster — or last longer — than expected. Therefore, investors should remain confident that Palantir has many years of growth ahead.
Jake Lerch has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Palantir Technologies. The Motley Fool has a disclosure policy.
