With the broader market beginning to retract amid valuation issues, high-growth tech shares comparable to Palantir PLTR and AMD AMD have been on the middle of the pullback regardless of their attractive AI prospects.
Palantir and AMD additionally took middle stage this week after posting favorable AI-driven Q3 outcomes that led to each revolutionary tech firms exceeding high and backside line expectations and elevating their steering.
Nonetheless, PLTR and AMD shares have fallen over 10% this month as fears set in that their in depth year-to-date rallies could also be overdone.
Picture Supply: Zacks Funding Analysis
AI-Progress Fuels Palantir & AMD’s Upgraded Outlook
Leaping into their steering, Palantir raised its full-year income outlook from a variety of $4.14–$4.15 billion to $4.39–$4.4 billion. The $250 million income improve was pushed by explosive demand for Palantir’s Synthetic Intelligence Platform (AIP), which helped gasoline a 63% yearly enhance in Q3 gross sales at $1.18 billion. Extra intriguing, Palantir’s U.S industrial phase income surged over 120% throughout Q3 with AIP being in excessive demand by organizations that need to safe, deploy, handle, and scale AI functions.
Notably, Palantir raised its This fall income outlook from earlier expectations of $1.19 billion to $1.33 billion. It’s additionally noteworthy that Palantir now expects its full-year adjusted working earnings to exceed $2.15 billion and elevated its full-year free money move goal vary to $1.9-$2.1 billion.
Picture Supply: Zacks Funding Analysis
In the meantime, AMD’s This fall steering displays confidence in its increasing AI and information middle companies, even because it navigates geopolitical constraints like restricted chip shipments to China. Whereas AMD didn’t formally carry its full-year income outlook or another monetary metric targets, the chip large raised its This fall gross sales steering by $400 million from a earlier forecast of $9.2 billion to $9.6 billion.
This comes as AMD’s AI chips and AI {hardware} methods (accelerators) led to document Q3 gross sales of $9.24 billion, a 35% enhance from $6.81 billion a yr in the past. Different spectacular This fall highlights included document free money move of $1.53 billion, which stretched over 200% from the comparative quarter, as illustrated by the quarterly chart under.
Picture Supply: Zacks Funding Analysis
PLTR & AMD Valuation Considerations
At present ranges, PLTR trades at a really excessive ahead earnings a number of of 266X, with AMD at a stretched 60X in comparison with the benchmark S&P 500’s 25X.
Paying P/E premiums for high-growth tech shares is to be anticipated, particularly for Palantir, which went public in 2020 and is already worthwhile, however elevated price-to-sales ratios have drawn consideration to the will for extra affordable valuations. On this regard, AMD has a ahead P/S ratio of 11X with the broader market at 5X, and Palantir is at an excessive 99X.
Picture Supply: Zacks Funding Analysis
What the Zacks Rank Suggests
Correlating with a pleasant uptick in fiscal 2025 and FY26 EPS revisions, Palantir inventory at present sports activities a Zacks Rank #2 (Purchase). In that final week, Palantir’s FY25 and FY26 EPS estimates have spiked 10% and 20%, respectively. Indicating PLTR could also be on monitor to develop into its lofty P/E valuation, Palantir’s annual EPS is now anticipated to soar 78% this yr and is projected to extend one other 43% in FY26 to $1.04.
Picture Supply: Zacks Funding Analysis
As for AMD, which lands a Zacks Rank #3 (Maintain), there hasn’t been a lot motion in FY25 EPS revisions during the last quarter, though FY26 EPS estimates have trended modestly larger and are up 2% within the final month from projections of $5.95 to $6.09. AMD’s backside line is projected to stretch by excessive double digits for the foreseeable future as nicely, however probably the most revered short-term inventory catalyst (elevated EPS revisions) has been considerably absent to counsel extra upside after such an intensive YTD rally.
Picture Supply: Zacks Funding Analysis
Conclusion & Strategic Ideas
Following their robust Q3 outcomes, the market seems to be extra prone to circle again and reward Palantir’s inventory amid this week’s broader pullback. That stated, the surge in each of those AI-focused firms’ free money move is beginning to make their long-term prospects extra interesting concerning the working leverage that ought to result in elevated profitability.
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