Palantir (NYSE: PLTR) and UiPath (NYSE: PATH) represent two ways to invest in the artificial intelligence (AI) market. Palantir mines data from disparate sources to help governments and commercial clients make data-driven decisions, and UiPath software robots help companies automate repetitive tasks.
Palantir went public through a live listing in September 2020. The stock started trading at $10, and that’s more than four times its record high of more than $43. It is also added to S&P 500 This September. UiPath went public through a traditional IPO at $56 in April 2021, but is currently trading at $13. Let’s see if Palantir will remain the better AI stock for the foreseeable future.
How Palantir proved the bear wrong
Palantir was founded more than two decades ago in response to the September 11 attacks. It was funded in part by the CIA’s Q-Tel business arm, and it was reportedly used to track down Osama bin Laden in 2011. Most US government agencies now use Palantir’s Gotham platform to manage data, and they say the main goal is to be. “a standard operating system for data between the US government.” It has also developed the Foundry platform for large commercial customers.
Palantir initially claimed to be able to increase revenue by at least 30% annually until 2025. The revenue increased by 47% in 2020 and 41% in 2021, but only grew by 24% in 2022 and 17% in 2023. curbed commercial growth Foundry.
But when Palantir’s top-line growth slowed, it stopped spending and turned a profit on a generally accepted accounting principles (GAAP) basis in 2023. That stable profit set it up for a new inclusion in the S&P 500.
Palantir expects revenue to grow 23%-24% this year as it secures a new government contract for Gotham, expands its US Foundry commercial business to higher levels, and launches new generative AI tools to process big data. Analysts expect GAAP EPS to more than double within a year.
From 2023 to 2026, analysts expect revenue and GAAP EPS to grow at a compound annual growth rate (CAGR) of 22% and 56%, respectively, due to business expansion. That growth rate is impressive, but a lot of optimism has been put into the stock at 184 times next year’s earnings and 29 times next year’s sales.
How UiPath proved the bull wrong
UiPath gained first hand in the robotic process automation (RPA) software market when it was founded nearly two decades ago. These RPA tools can be connected to an organization’s existing software to automate repetitive tasks like onboarding customers, entering data, processing invoices, and sending mass emails. The new AI service can also analyze the data flowing through the robot.
UiPath is now the world’s largest provider of RPA software, and its revenue grew 81% in fiscal 2021 (which ends in January 2021) and 47% in fiscal 2022. Its revenue grew only 19% in fiscal 2023 as headwinds and geopolitics affected many companies to cancel software spending, but it is accelerating again with 24% growth in fiscal 2024.
For fiscal 2025, UiPath expects revenue to grow by just 9%. It mainly blames the slowdown again on the harsh macro environment, but it also coincides with the use of newer generative AI tools that can automate many of the same repetitive tasks. The sudden resignation of CEO Rob Enslin this year added even more red flags.
From fiscal 2024 to fiscal 2026, analysts expect UiPath’s revenue to grow at a CAGR of around 11%. But he also expects the company to remain unprofitable on a GAAP basis — and may struggle to cut losses as it tries to keep pace with newer generative AI tools. UiPath shares trade at just 4 times next year’s sales, but could struggle to command a higher valuation unless it remains relevant in the fast-moving AI market.
Better buy: Palantir
I wouldn’t rush to buy one of these stocks right now. Palantir’s stock still looks very expensive, and UiPath has yet to come up with a viable way to revive its growth engine. But if I had to pick one, I’d stick with Palantir because it’s bigger, growing faster, more profitable, has a wider moat, and has been added to the S&P 500 index.
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Leo Sun has no position in any of the stocks mentioned. The Motley Fool has positions and recommends Palantir Technologies and UiPath. The Motley Fool has a disclosure policy.
Better Artificial Intelligence Stocks: Palantir vs. UiPath was originally published by The Motley Fool
