Palantir's AI-Driven Growth Sparks Debate on Future Valuation

Is Palantir Stock a Millionaire Maker?

Palantir Technologies (PLTR 0.95%) is back in the spotlight. After a high-profile initial public offering, the company's stock slid almost 80% from its high in February of 2021. Many investors believed it was overhyped as it struggled to turn a profit. Now, however, it's in the black, and the stock is up more than 340% this year alone. The company earned a cadre of loyal investors as it continues to grow its top and bottom lines by double digits. The fervor reached a new level after the election because many believe the company will benefit from a Trump presidency. So, is Palantir a millionaire maker? Palantir's commercial segment is booming Founded in 2003, Palantir is anything but new, and the company has been developing artificial intelligence (AI) platforms for some time. The company's core products, Gotham and Foundry, use AI and machine learning models to help commercial and government organizations analyze and make real-time decisions. But a synergy appears to be forming between its software and the AI hardware that has come along in the past few years thanks to Nvidia and other semiconductor companies. CEO Alex Karp has talked about the "U.S.-driven AI revolution that has taken full hold," and Palantir is at the bleeding edge. The company is famous for its government clients, especially national security agencies like the CIA and numerous branches of the Department of Defense, but it is finding new footing in helping businesses boost efficiency. A new "boot camp" sales program eschews the traditional model of a sales staff (Karp firmly believes his products sell themselves), and Palantir grew its domestic client list by 77% year over year for the third quarter. This led to a 54% jump in revenue for its commercial segment and contributed to the 27% growth in sales across the whole company. Amazingly, not only do these boot camps appear to work in boosting sales, but they are also much more cost-effective than maintaining a sales staff; third-quarter net income doubled year over year. Palantir appears poised to expand its role under the new administration To be clear, no explicit policies have been put forth by President-elect Donald Trump that mention Palantir, but there are plenty of signs that indicate the next four years could be lucrative for the company. Perhaps the most direct: It's been reported that Trump is considering the chief technical officer of the company for a key role in the Pentagon. Furthermore, the efficiency its platforms provide fits nicely with the mission of the proposed Department of Government Efficiency (DOGE), the non-governmental unit co-headed by Elon Musk whose SpaceX is a partner of Palantir. The company is already heavily embedded throughout the government, and expanding its role would not be difficult. The question at hand So, things look good for the company, but is it good enough for us to consider it a millionaire maker? First, we have to define what that is. Let's say we need to turn $10,000 into $1 million. We're not here to get rich quick, however -- that's a good way to lose money. Investing is about patience and keeping your eyes on a long-term horizon. Let's say we need to make that $1 million in 30 years. But remember, inflation degrades the value of money over time: $1 million today will be worth less than $1 million in 2055 -- a lot less. If we account for inflation, 30 years from now we need $3.3 million to have the equivalent of $1 million today. That's a 33,000% return and would mean a share price of $23,100 (it sits at just above $70 at the time of this writing). Let's assume that to reach this share price, Palantir would have to grow its earnings by roughly the same amount. It brought in almost $150 million last quarter in net earnings. So, in 30 years, its quarterly earnings would need to be about $50 billion. While that's no easy task, I can see it being at least possible; it's certainly in line with what the largest tech companies make. Here's the thing: Palantir currently carries a price-to-earnings ratio (P/E) of 370. We can pretty safely assume it won't be able to maintain that kind of premium for 30 years. None of the largest companies in the world do. The biggest players in tech like Alphabet and Microsoft carry P/Es of roughly 30. Let's be generous and assume Palantir's P/E will be twice that. That means that the company would have to be making $300 billion a quarter to carry a share price of $21,000. That's not going to happen. Alphabet is the most profitable company in tech and pulled in $26 billion in profit last quarter -- $87 billion in 2055 numbers. Given this, do you believe Palantir can bring in $300 billion? I don't. Still, even if it doesn't meet our definition of a millionaire maker, Palantir Technologies can still be a good investment. I would say, however, to exercise caution here. There is a ton of growth already baked into its current valuation; any slip-up could be costly.

Palantir Stock: A Millionaire-Maker in the Making? | The Motley Fool

This controversial data mining company is still growing rapidly. Palantir (PLTR 2.29%), a provider of data mining and analytics services, went public via a direct listing on Sept. 30, 2020. Its stock opened at $10 on the first day and soared to $39 during the meme stock rally on Jan. 27, 2021, but subsequently sank to an all-time low of $6 on Dec. 27. 2022. Like many of its peers, Palantir lost its luster as its growth cooled off and rising interest rates compressed its valuations. It was also a controversial company because it was backed by the CIA's venture capital arm and used by Immigration and Customs Enforcement (ICE) to deport undocumented immigrants. However, if you had invested $100,000 in Palantir at its all-time low, your investment would be worth a whopping $1.37 million today. Its stock soared to the $80s over the past two years as its sales growth accelerated, its profits surged, and it joined the S&P 500. Could that rally continue and generate more millionaire-making gains over the next few years? Palantir, which was named after the all-seeing stones from The Lord of the Rings, was founded in 2003 in response to the Sept. 11 attacks. Its Gotham platform gathers and crunches data for U.S. government agencies, and it says its ultimate goal is to become the "default operating system for data across the U.S. government." Its Foundry platform serves commercial customers. Palantir mainly helps these large customers break down the silos between their different departments and computing platforms, gather all of that data into a centralized location, and spot trends to help them make smarter, data-driven decisions. After its public debut, Palantir initially claimed it could grow its annual revenue by at least 30% annually through 2025. Its revenue rose 47% in 2020 and 41% in 2021 but grew just 24% in 2022 and 17% in 2023. That slowdown -- which it mainly blamed on the uneven timing of government contracts and macro headwinds for its commercial customers -- spooked the bulls. But as Palantir's sales growth cooled off, its profits soared as it trimmed its spending and reined in its stock-based compensation expenses. It also turned profitable for the full year in 2023, which led to its inclusion in the S&P 500 this September. Two main catalysts are driving Palantir's stock higher. First, it expects its revenue to rise 26% in 2024. It attributes that reacceleration to the robust growth of its U.S. commercial business, new government contracts, and the rollout of new generative artificial intelligence (AI) services for streamlining its data mining services. Second, its margins are expanding, and its profits are soaring. In the first nine months of 2024, its adjusted operating margin rose year over year from 26% to 37%. Its adjusted free cash flow (FCF) margin rose from 26% to 36%, and its net income more than tripled on a generally accepted accounting principles (GAAP) basis. It expects to remain firmly profitable on a GAAP basis for the foreseeable future. From 2023 to 2026, analysts expect Palantir's revenue to grow at a compound annual growth rate (CAGR) of 24% as its GAAP earnings per share (EPS) rises at a CAGR of 59%. That growth could be driven by the ongoing geopolitical conflicts (which should generate tailwinds for Gotham) and the secular expansion of the big data and AI markets. Palantir is still growing rapidly, but it's also priced for perfection at more than 160 times its forward earnings and 50 times next year's sales. The bulls believe its early mover advantage in the data aggregation space, the stickiness of its government contracts, and the rapid growth of its U.S. commercial business justify those high valuations. Expectations for lower interest rates are also drawing back more speculative investors. But it also isn't hard to find other high-growth digital transformation companies that are trading at much more reasonable valuations. ServiceNow (NYSE: NOW), the digital workflow services leader, which is expected to grow its top line by at least 20% for the next few years, trades at 67 times forward earnings and 18 times next year's sales. That might be why Palantir's insiders still sold more than twice as many shares as they bought over the past 12 months. Its CEO, Alex Karp, has also been consistently selling his shares through a Rule 10b5-1 plan (which automatically sells the stock when certain criteria are met) over the past four years, but that isn't too surprising since most of his salary consists of stock-based compensation instead of cash. Palantir might eventually turn a fresh $100,000 investment into $1 million again, but it will probably take a lot longer than two years this time around. At these valuations, Palantir's stock could easily be cut in half and still be considered pricey relative to its growth potential -- so investors should gradually accumulate it instead of expecting it to be a quick millionaire-maker.

Where Will Palantir Stock Be in 5 Years? | The Motley Fool

Palantir (PLTR 2.29%) has become one of the leading companies in artificial intelligence (AI), proving the revolutionary technology has incredible utility and value in the real world. With companies further up the value chain reaching gargantuan valuations -- Nvidia's market capitalization is currently about $3.4 trillion -- investors are eager to see AI deliver on its promise. Palantir is doing just that. Wall Street had high expectations for the company's latest earnings. Palantir beat those expectations by a healthy margin, posting $725 million in revenue for the quarter when just $703 million was expected. That's a 27% gain compared to the third quarter of 2023. That kind of growth is what investors love to see. Though the company has seen double-digit growth every quarter for years, that's the biggest jump since the middle of 2022. The growth was driven by a boom in the company's commercial segment, both in number of clients and overall value. Palantir's bread and butter is its government contracts. Make no mistake; that side of the business is still going strong, but commercial clients like Microsoft are becoming a bigger part of the story. Palantir grew its U.S. client base significantly, now up 77% since Q3 2023. Demand seems to be spiking as Palantir's technology matures alongside the AI hardware that powers it. As Alex Karp, Palantir's CEO, puts it, there's a "U.S.-driven AI revolution that has taken full hold." For Karp, things are just getting started. Along with sales growth, Palantir is cutting costs. Check out its profit margin growth over the last 3 years below. PLTR Profit Margin data by YCharts. A big part of the incredible performance of the company's shares over the last month has been the expectation that a Trump administration will mean more government contracts. Most of this is conjecture at this point, but a favorable relationship looks possible. Trump's proposed Department of Government Efficiency (DOGE), led by Elon Musk, could push for an expansion of tech within the government, viewing it as the perfect tool to achieve DOGE's namesake mission. Trump is also reported to be considering Palantir's CTO, Shyam Sankar, for a top research and engineering job within the Pentagon. I'm not going to argue that Palantir is anything other than an incredibly innovative company firing on all cylinders. That's not the issue. The issue is the company's valuation and the incredible hype that surrounds it. While it could stand to benefit greatly from the incoming administration, the market appears to be convinced it's a sure thing. If things don't turn out the way investors hope, Palantir's stock could take a big hit. At present, Palantir's price-to-earnings (P/E) ratio is a wildly high 382, about seven times Nvidia's P/E and 15 times Alphabet's. Now, this isn't exactly apples to apples, but it's still useful to provide some context. The truth is that valuation metrics are only so useful when dealing with a company with as much potential as Palantir. With this sort of valuation, the company has to continue to post monster numbers quarter after quarter. Take Nvidia. It more than doubled its earnings per share (EPS) last quarter, yet its stock is down from before it reported earnings. Palantir also faces a lot of competition from established players like Oracle and IBM and smaller, AI-native companies like Snowflake. Are its products that much better? Can it maintain that edge consistently? Will the potential for a close relationship with the new administration materialize? With this sort of valuation, I would hold off on Palantir unless you are particularly risk-tolerant. I think it will prove difficult for the company to deliver the kind of growth it needs over the next five years to justify its current valuation.

Buy Palantir Stock Before It Soars 200% to $500 Billion, According to a Wall Street Analyst | The Motley Fool

Palantir Technologies (PLTR 6.22%) has been one of the hottest stocks on the market in recent months. Shares have advanced 320% year to date as of Dec. 5 due to enthusiasm surrounding artificial intelligence (AI). That makes Palantir the best-performing member of the S&P 500 (SNPINDEX: ^GSPC) this year. The company is currently worth $165 billion, but Dan Ives at Wedbush Securities thinks "Palantir could be the next Oracle." That statement may have caught the attention of more investors had Ives chosen (for lack of a better word) a trendier comparison, but the implications are still enormous for shareholders. Oracle is a $500 billion company (200% more than Palantir), with a strong presence in several enterprise-software verticals, including analytics and business intelligence platforms. Ives does not expect Palantir shares to surge 200% in the next 12 months but instead thinks the company can grow into that valuation over the next three to four years. What makes that call particularly surprising is that most pundits are still skeptical about Palantir. Among the 20 analysts following the company, the stock has a median target price of $38 per share. That implies 47% downside from its current share price of $72. Here's what investors should know about Palantir. Palantir helps commercial and government organizations make sense of complex data. Its core products, Gotham and Foundry, let clients integrate information and machine learning (ML) models into analytical applications. And its AI platform AIP adds support for large language models and generative AI to its core software products. In August, Forrester Research recognized the company as a leader in AI/ML platforms. The analysts wrote, "Palantir is quietly becoming one of the largest players in this market." And in September, Dresner Advisory Services listed Palantir as a top vendor in its 2024 market study on AI/ML and data science software. That puts the company in a good position. The International Data Corp. (IDC) estimates that AI platform spending will increase at 41% annually through 2028. Meanwhile, Grand View Research expects the data-analytics software market to grow at 27% annually through 2030. Palantir checked all the right boxes with its third-quarter financial report. The company beat expectations, raised full-year guidance, and provided encouraging insight into the business. Total revenue increased 30% to $725 million, the fifth-straight sequential acceleration, and non-GAAP net income soared 43% to $0.10 per diluted share. Particularly important was the sales growth of 40% among U.S. government customers, an acceleration from 24% in Q2 and 12% in Q1. CFO Dave Glazer attributed the uptick to new contract awards that reflect growing demand for AI in government software. For example, Palantir recently won a $100 million deal that will expand its Maven Smart System for battlespace awareness to more U.S. military personnel. Looking ahead, management now expects full-year revenue to increase 26%, which is 3 percentage points faster than what the company previously anticipated. However, that forecast implies revenue will grow 26% in Q4, which would be a deceleration from 30% in Q3. Palantir should benefit as organizations across the commercial and government sectors use AI analytics to improve labor productivity and operational efficiency. But the valuation is rather worrisome. Wall Street expects adjusted earnings to increase at 25% annually through 2027, which makes the current price-to-earnings (P/E) ratio of 205 look absurdly expensive. Wedbush analyst Dan Ives thinks Wall Street is underestimating how much Palantir will benefit as demand for AI software increases. He estimates earnings could grow 15% to 20% faster than analysts anticipate. But the current valuation still looks unreasonable even in that scenario. Indeed, Gil Luria at D.A. Davidson recently said Palantir trades at "an unprecedented premium" to other software companies. Ives seems unconcerned by the valuation, but he also sees very little near-term upside. Despite saying Palantir may be the next Oracle, and once referring to the stock as "probably the best pure play AI name," Ives' 12-month target price of $75 per share implies just 4% upside from the current share price of $72. Personally, I think investors should avoid this stock right now. Palantir is executing well on what promises to be a massive market opportunity, but the present valuation appears to be disconnected from business fundamentals. My opinion may cause regret in the near term if Palantir shares keep moving higher, but I think investors will have the chance to buy at a far cheaper price in the future.

Where Will Palantir Technologies Stock Be in 1 Year? | The Motley Fool

It would be an understatement to say that Palantir Technologies (PLTR 6.22%) stock has been in fine form on the market in 2024, as shares of the software platform specialist have shot up a stunning 290% so far this year as of this writing. The past month alone has been a terrific one for Palantir investors as the stock has zoomed 62% since releasing its third-quarter results on Nov. 4. Artificial intelligence (AI) has played a defining role in this red-hot rally as enterprises and governments have been flocking to Palantir to help them integrate generative AI into their operations, helping the company accelerate its growth and build a robust revenue pipeline. Wall Street, however, isn't expecting Palantir stock to sustain its momentum in 2025. Let's see why. The 20 analysts covering Palantir have a one-year price target of $38 on the stock. That points toward a 43% drop from current levels. Another thing worth noting is that 35% of the analysts recommend selling Palantir stock. Half of them have a "hold" rating, while only 15% recommend buying it. Moreover, the Street-high price target of $75 suggests that Palantir stock could jump only 12% from where it is right now in the next year. The valuation is one of the main reasons why analysts aren't projecting much upside in Palantir stock. After all, Palantir is now trading at a whopping 62 times sales. Its trailing price-to-earnings (P/E) ratio stands at 342. While the forward earnings multiple of 137 points toward an improvement in its bottom line, it is still very rich. It is worth noting that these multiples are way higher than AI pioneer Nvidia, a company that has been growing at a much faster pace than Palantir. For instance, Nvidia's revenue in its latest quarter increased an impressive 94% year over year to $35.1 billion. Its earnings, meanwhile, jumped 103% to $0.81 per share. Palantir, on the other hand, reported a 30% increase in revenue in Q3 to $726 million. The company's adjusted earnings increased by 43% from the year-ago period to $0.10 per share. Of course, this is not an ideal comparison as Nvidia is primarily a hardware company that's also finding success in AI software, while Palantir is a pure-play software provider. However, the fact that Nvidia is growing at a much faster pace despite its bigger size and is trading at a much lower 32 times forward earnings when compared to Palantir makes the former a much more logical AI stock to invest in right now. Moreover, Palantir's valuation puts it at risk of a major sell-off in case there are any cracks in its growth story, which means that it will have to continue delivering stronger growth quarter after quarter to justify its rich multiples. While there is no doubt that Palantir's valuation suggests that the stock may have run ahead of itself, there are a few things that are working in the company's favor and could be tailwinds for the stock next year. First, Palantir's revenue growth rate has improved in each quarter of 2024. Its top line was up 21% year over year in Q1, followed by a 27% increase in Q2. We have already seen that it clocked a 30% revenue jump last quarter, driven by the robust demand for the company's AI software platform. The second reason why Palantir may be able to sustain its impressive rally is the impressive growth in its customer count and deal size, which are allowing it to build a healthy long-term revenue pipeline. More specifically, there was a 39% increase in Palantir's customer count last quarter. The number of $1 million deals signed by the company increased to 104 from 80 in the year-ago period. As a result, the remaining deal value (RDV) of Palantir's contracts increased by 22% to $4.5 billion last quarter. Considering that this metric refers to the total remaining value of contracts the company was sitting on at the end of the quarter, its impressive growth suggests that Palantir is in a position to keep growing its revenue at a nice pace in the long run. The third reason why Palantir may still seem attractive to growth investors is its strong unit economics. The company's non-GAAP operating margin in Q3 stood at 38%, up from 29% in the same period last year. Unit economics refers to the profit made by a company from each customer or product it sells after deducting expenses. Favorable unit economics suggest that Palantir is making more money from its customers now, and that's not surprising. In the company's November earnings conference call, management gave several examples of its customers expanding their contracts after signing up to use its solutions. That trend could continue in the future as the AI software platforms market is currently in its early phases of growth. IDC forecasts that the spending on AI software platforms could jump from $27.9 billion in 2023 to $153 billion in 2028. As a result, the adoption of Palantir's offerings is likely to improve further in the long run, and its strong unit economics should ideally allow it to maintain its impressive earnings growth. The above factors explain why analysts have increased their earnings growth expectations from Palantir for 2025 and 2026. If Palantir manages to continue outperforming analysts' expectations over the next year and attains stronger levels of revenue and earnings growth, there is a good chance that it may be able to justify its valuation and head higher in 2025. Conservative investors, however, would do well to look at other options if they are looking to capitalize on the AI boom, as Palantir's expensive valuation makes it prone to volatility.

Where Will Palantir Stock Be in 3 Years? | The Motley Fool

Every time I look at the stock of Palantir Technologies (PLTR 6.22%), it seems to be at a new record high. The company has been an early winner in the hype cycle for generative artificial intelligence (AI) software. And with shares up 313% year to date at the time of this writing, many investors are wondering how much longer this bull run will last. Let's explore the pros and cons of Palantir to decide if it still has a place in your portfolio. Founded in 2003, Palantir can be thought of as an early adopter of what we now know as AI. The company specializes in data analytics, which involves processing huge volumes of information to uncover actionable insights and trends. And this tech was a precursor to the large language models (LLMs) behind platforms like ChatGPT. Palantir was quick to adapt to the evolution of its industry. In 2023, it launched its Artificial Intelligence Platform (AIP), designed to combine LLMs with its legacy data analytics. The AIP helps clients with real-time decision-making and allows them to create customized applications based on their data in a secure in-house environment. This can be particularly useful for military and law enforcement, giving operators real-time info about threats and targets during field operations while keeping records for legal and regulatory compliance. Palantir's third-quarter revenue increased 30% year over year to $725.5 million, helped by the rollout of its new AI-related functionality, particularly among U.S. government and commercial clients. The company is also consistently profitable, with adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) rising 39% to $283.6 million, although this figure adds back significant outflows like stock-based compensation, which totaled $142.4 million in the period. Over the next three years, it's safe to assume Palantir can maintain its current growth rate as AI technology improves. Management certainly seems optimistic, with CEO Alex Karp suggesting that organizations that fail to adopt productivity enhancers like its AIP risk being left behind in what he calls a "winner-takes-all economy." The company has scored some high-profile clients, including the armed forces of Israel and Ukraine, which are both using its software for combat-related missions. That said, while Palantir seems to have established trust within the defense industry, it is unclear if the company will be able to fend off large commercial sector rivals like Microsoft or Snowflake, which also offer data analytics and AI software within their cloud computing ecosystems. Palantir is an easy company to get excited about. It synergizes data analytics with generative AI to serve very cool uses in the military and law enforcement. That being said, hype doesn't pay the bills. With a forward price-to-earnings ratio (P/E) of 152, its valuation has lost touch with reality. The S&P 500 has an average forward P/E estimate of 23, while the AI industry leader Nvidia has a forward P/E of just 33 despite growing its sales and profits by 94% and 109%, respectively, in its most recent quarter. Palantir is nowhere close to this. This level of overvaluation will probably cause the stock to underperform over the next three years. And while early investors can pat themselves on the back for making an unusually good bet, it might be time to consider taking some profits off the table.

Will Palantir Technologies Stock Continue Its Red-Hot Rally in 2025? | The Motley Fool

To say that it has been an exceptional year for Palantir Technologies (PLTR -2.17%) would be a gross understatement. Heading into this trading week, the stock rallied by more than 320% since the start of the year. The company has been added to the S&P 500 and now, with its move to the Nasdaq Stock Exchange complete, it's likely just a matter of time before it is added to an even more exclusive club -- the Nasdaq-100 index. Palantir's business has been booming as artificial intelligence (AI) elevated the company's offerings, leading to a surge in demand, and multiple quarters of impressive results. But is this tech stock still a no-brainer buy heading into 2025? Investors have been bullish on Palantir's numbers this year as the data analytics company has been delivering much-improved results. In the third quarter, revenue rose by 30% year over year, to $726 million. That was the continuation of a promising trend for the business, with CEO Alex Karp referring to the AI-fueled demand as "unrelenting" and further claiming that it "won't slow down." Now, with a Republican administration set to take over in Washington next year, it is possible the U.S. government will increase spending on defense and border security, so investors may be expecting even greater demand for Palantir's services in 2025. The company generates the majority of its revenue from government customers, as it offers services that aid with intelligence analysis and counterterrorism efforts. But while Palantir's government revenue may increase, the commercial side of the business may face some headwinds. Many businesses have been investing heavily in AI this year to get in on the hype and launch new AI-powered products and services. But amid that rush, some companies have taken on projects that may not prove to be all that worthwhile or profitable. In a July report, research company Gartner predicted that by the end of next year, "[a]t least 30% of generative AI (GenAI) projects will be abandoned after proof of concept ... due to poor data quality, inadequate risk controls, escalating costs or unclear business value." While Palantir's CEO may believe demand for the company's services isn't going to slow down, periods of excessive spending followed by sharp shifts away from it aren't unheard of in tech. Investors only need to think back a couple of years to when companies were investing heavily in the metaverse or expecting that pandemic-fueled levels of demand for various services would be the new norm. Instead, as economic conditions slowed, companies scaled back expenditures, and layoffs followed. Assuming that demand simply won't slow can be a dangerous assumption for CEOs to make, and for investors to believe. AI could transform industries, but it's not about to take everyone's job tomorrow, either. And as companies adjust their understanding of what generative AI can and cannot do right now, there could be a significant adjustment in AI-related spending. Given how rapidly Palantir's stock price has soared, one big risk it faces is investors will sell their positions to lock in their gains. Currently, the stock trades at close to 400 times its trailing earnings. And while that ratio drops to 160 based on next year's expected earnings (according to analysts' consensus estimates), those are massive premiums to be paying for the business. A 30% growth rate is solid, but it's arguably not nearly enough to warrant such a lofty valuation. Palantir's rally might continue, but with such massive gains already behind it in 2024, it appears unlikely that the stock will soar a whole lot higher next year -- and the possibility that it could suffer a steep decline is growing.

Should You Buy Palantir After Its 280% Gain This Year? Wall Street Says This. | The Motley Fool

Palantir Technologies (PLTR 6.22%) was once known as a software-as-a-service company that did most of its business with the government. But in recent times, the company, along with increasing its revenue from government contracts, has also seen its commercial business growth explode. How did this long-established player suddenly supercharge its revenue? Well, it's a combination of the platform Palantir built over its 20-year history and its more recent jump into artificial intelligence (AI). In fact, thanks to Palantir's launch of its Artificial Intelligence Platform (AIP) last year, we could call the company one of the early winners of the AI boom. Demand for AIP has taken off, and earnings have followed, with the company recently reporting its highest quarterly profit ever. So, it's no surprise investors have flocked to the shares, driving them up more than 280% this year. After this sort of performance and an increase in valuation, though, you may wonder whether it's too late to get in on this growth story. Should you buy Palantir right now? Let's consider what Wall Street has to say. First, though, let's talk a bit about Palantir's path so far. Through its platform, the company helps customers aggregate their data and use it to make better decisions. The results could be game-changing, helping companies, for example, become more efficient and achieve huge cost savings or even launch new products and services. And AIP, harnessing the power of AI, has become particularly popular among government and commercial customers. This has resulted in double-digit revenue growth for Palantir and impressive trends in the commercial business. Just four years ago, the company had 14 U.S. commercial customers, and today, it has grown that to nearly 300. This is compelling for two reasons. The pace of growth shows Palantir's platform greatly interests these customers, and the number of commercial customers today leaves plenty of room for growth well into the future. What we can see in figures from the recent quarter also supports the idea of growth now and down the road. In the three-month period, Palantir's U.S. commercial revenue soared 54%, and U.S. government revenue rose 40%. This shows the strength of the company's new growth driver -- the commercial business -- as well as the government business it's relied on for years. So, Palantir is firing on all cylinders, and we could expect this to continue since AIP's launch was rather recent. Forecasts show the general AI market has much growth ahead. Analysts expect today's $200 billion AI market to reach $1 trillion by the end of the decade. Palantir has also spoken of high demand for AIP, and deal values are increasing. In the recent quarter, the company has closed more than 100 deals with a value greater than $1 million. All of these points are positive and may encourage investors to get in on the stock now. But Wall Street isn't so optimistic about the share performance to come. The average analyst estimate calls for the stock to drop 40% from today's level over the coming 12 months, and most analysts have a hold recommendation on the shares. This isn't necessarily due to a loss of faith in the company -- it's more about valuation. This year's gains have left Palantir trading for 175 times forward earnings estimates, a level that may look pretty steep -- even for a growth stock. So, Wall Street doesn't recommend buying Palantir right now. Now, the big question is: Should you follow Wall Street's advice? No one can predict stock performance with 100% certainty, but the current valuation may limit Palantir's near-term performance -- and the stock might not deliver outsize gains in the weeks and months ahead. Investors who are very cautious or focused on value probably shouldn't pile into Palantir right now. That said, earnings projections used in the above valuation measure don't consider earnings a few years down the road. Palantir's future looks bright, and the company seems to be on the path to long-term revenue and profit growth. This means that even after Palantir's triple-digit gain this year, the stock still has plenty of room to run over the long term, making it a great AI stock for growth investors to buy now.

Palantir's Stock Quadrupled in 2024. Can It Repeat in 2025? | The Motley Fool

Palantir (PLTR 6.22%) has been one of 2024's best-performing stocks. As of the time of writing, it has risen an astounding 340%, meaning the stock has more than quadrupled in 2024. That's an impressive performance, but anyone who doesn't own the stock is wondering if there's more upside to be had with Palantir. With 2025 right around the corner, can Palantir repeat its 2024 performance next year? With returns like that, you might guess that Palantir is somehow involved with artificial intelligence (AI), and you'd be right. Palantir's software gives those with decision-making authority all of the information they need to make the most informed choice possible. At first, this software was exclusively used by the government. Then, Palantir expanded its reach to the commercial sector, where it also saw strong demand. However, the biggest rise in demand occurred recently with its Artificial Intelligence Platform (AIP). AIP allows AI to be integrated into workflows rather than be a tool on the side. It also allows data to be maintained within the platform, so third-party generative AI models don't have access to potentially sensitive information. Palantir saw demand for its software explode in 2024, and management is extremely bullish on its future. CEO Alex Karp summarized Q3 in one sentence: "We absolutely eviscerated this quarter, driven by unrelenting AI demand that won't slow down." In the third quarter, Palantir saw revenue rise 30% year over year to $726 million. However, the U.S. saw outsized demand compared to its international counterparts, as U.S. commercial revenue rose 54% year over year to $179 million, and U.S. government revenue rose 40% year over year to $320 million. Clearly, AI has been a huge hit in the U.S., but that enthusiasm has yet to spill over to the international community. Another hallmark of Palantir's AI business is that it's actually profitable. In Q3, it posted a second consecutive quarter with a 20% profit margin. This proves that a software company doesn't need to be growth at all costs -- growth and financial responsibility can go hand in hand. But that's the past; what does the future hold? If you're thinking, "How can Palantir's stock be up more than 300% when revenue was only up 30%," you're not alone. While Palantir's business looked great, its stock returns are unbelievable. Most of Palantir's stock returns have come from a mechanism called multiple expansion. Multiple expansion occurs when investors are willing to pay more for a company's given financials; therefore, its valuation rises. This has happened with Palantir, as the stock now trades for 184 times forward earnings and 63 times sales. If you're familiar with either valuation metric, then you know how expensive the stock is. Even a forward price-to-earnings (P/E) ratio of 63 would be expensive, yet that's what it trades at when only sales are accounted for. However, Nvidia also saw its revenue rise 320% from the start of 2023 until now, which justified the higher price tag. Palantir isn't anywhere close to that growth level, and it has no business being valued as highly as it is. Unless Palantir's growth rate accelerates to a pace where it's doubling year over year, this stock is ripe for a significant pullback, and investors need to be careful with it. As a result, I don't think there's any way for Palantir to repeat its 2024 performance in 2025. If anything, I'd expect to go backward in 2025, as even if the business does well (which I think it will do), the expectations are far too high to produce any sort of positive stock returns.

Should You Buy Palantir Technologies Stock Before Dec. 13? Wall Street Has a Compelling Answer That Might Surprise You.

Analysts rarely agree on anything, but a surprising number share a similar opinion on the data mining and artificial intelligence (AI) specialist. Since the advent of artificial intelligence (AI) early last year, the number of use cases has continued to soar. The ability of these advanced algorithms to streamline processes and increase productivity has companies of all stripes looking for ways to adopt generative AI, integrate it into their businesses, and reap their part of the expected financial windfall. One of the clear and certain beneficiaries has been Palantir Technologies (PLTR 5.65%). The stock is up more than 287% so far this year (as of this writing) and up 934% since AI first went viral in early 2023. However, the soaring stock price has been accompanied by a commensurate increase in Palantir's valuation, which has made some investors justifiably nervous. Yet there could be another catalyst just over the horizon. Below I'll look at what has fueled Palantir's recent success, the potentially important milestone ahead, and what the collective wisdom of Wall Street says. Decades of AI expertise Palantir is a relative Johnny-come-lately on the Wall Street scene, but the company has been working in the shadows developing cutting-edge AI solutions for two decades. Palantir was the brainchild of Peter Thiel, who envisioned an AI-based system that could gather data from siloed intelligence systems, connect seemingly random bits of information, and uncover potential terrorist plots to prevent tragedies like 9/11. From that dream, Palantir was born. It didn't take long for the company to discover that these same advanced algorithms could be used on any number of business challenges, delving deeply into corporate systems and thereby uncovering valuable insight and providing actionable intelligence. However, the revolutionary development came with the dawn of generative AI. Palantir quickly pivoted to develop its Artificial Intelligence Platform (AIP), which leverages AI to make company data more useful to enterprises. By scouring internal information, AIP can solve company-specific problems, unearthing answers that managers might otherwise miss. In a brilliant move, Palantir paired this system with hands-on training sessions, dubbed boot camps. "These immersive, hands-on sessions allow new and existing customers to build live alongside Palantir engineers, all working toward the common goal of deploying AI in operations," Palantir said. The unbridled success of AIP can't be overstated. In the third quarter, the company's revenue grew 30% year over year, while adjusted earnings per share (EPS) jumped 43% -- but the devil is in the details. Palantir's U.S. commercial revenue, which includes AIP, rose 54%, while the segment's customer count jumped 77%. Additionally, the segment's remaining deal value (RDV) -- which highlights the likely trajectory of future results -- increased 73%. A strategic shift Last month, Palantir announced it was transferring its stock to the Nasdaq exchange. At the time, it noted, "Upon transferring, Palantir anticipates meeting the eligibility requirements of the Nasdaq-100 Index." While this might sound like a non-event, it could be the catalyst that boosts the stock once more. Investors may recall there was a great deal of excitement when Palantir was selected for inclusion in the S&P 500 in late September. Many investors view this as a validation of their investing theses, as the companies selected must meet certain profitability and liquidity criteria. Furthermore, exchange-traded funds (ETFs) and other passive-investment vehicles that track these indexes must buy shares in order to mimic the returns of the index in question. The annual rebalancing of the Nasdaq-100 index is scheduled to be announced on Dec. 13, with changes to take place on Dec. 20. Many on Wall Street believe Palantir tops the list for inclusion. If Palantir becomes part of the Nasdaq-100 index, the stock could once again get a boost. Does Wall Street think Palantir is a buy? Despite Palantir's brilliant execution and accelerating financial results, many on Wall Street are bearish on the stock, and their reasoning is understandable. The parabolic move in the stock price has come with a commensurate increase in its valuation. The stock is currently trading for 175 times forward earnings and 44 times forward sales (as of this writing), which is lofty by any stretch of the imagination. However, these metrics fall short when evaluating a high-growth stock like Palantir. When measured using the more appropriate forward price/earnings-to-growth ratio (PEG) -- which factors in Palantir's surging growth -- its valuation clocks in at 0.58, when any number less than 1 is the standard for an undervalued stock. Still, many on Wall Street are taking a pass. Of the 19 analysts who offered an opinion on Palantir so far in December, only four rate the stock a buy or strong buy, while eight recommend holding, and seven rate it underperform or sell. That means 79% don't think Palantir is a buy right now. One representative take was issued by Jefferies analyst Brent Thill. The analyst calls Palantir the "most expensive" stock in software, a sentiment echoed by many of his colleagues. He also warns of tough comps ahead. That said, the analyst issued a rare mea culpa, writing, "We underestimated the momentum that [Palantir] was able to garner after the launch of Artificial Intelligence Platform (AIP) boot camps," he wrote, citing the company's multiple-quarter stretch of accelerating growth. Argus Research analyst Joseph Bonner echoed his concerns, noting, "The market tends to punish highly valued tech stocks." That said, Wedbush analyst Dan Ives maintains an outperform (buy) rating and recently boosted his price target to $75, representing potential upside of 13% (as of this writing). He said the company's AIP boot-camp strategy is "game-changing." BofA analyst Mariana Perez Mora concurs, rating the stock a buy with a $75 price target, saying Palantir is "poised to dominate." Those bulls aside, the consensus is clear. Wall Street believes Palantir stock is too expensive, and any failure on the company's part -- real or imagined -- could send the stock plunging. Here's the thing... Investors who already own Palantir stock (like I do) should adopt and maintain a long-term approach to investing and hang on for dear life. It's clear that Palantir has an AI solution that speaks to customers, and given the accelerating adoption of AI, that will likely continue. However, there will certainly be bumps in the road. For investors who feel the train has left the station, take heart. One effective strategy is to buy a small stake in Palantir and watch for future opportunities to add at better value points. If that stock falls in the future -- which is almost certainly the case -- astute investors will have the opportunity to add to their positions at a more attractive valuation. Dollar-cost averaging is another helpful strategy, which helps investors build a position over time, adding more shares when the price is lower and fewer when the valuation is higher. Investors will benefit from a long-term outlook but will need a strong constitution to withstand the volatility that will no doubt be part of Palantir's future.

Palantir secures military contracts but can its stock sustain growth?

Palantir Technologies (PLTR) recently expanded its defense sector footprint with multiple significant announcements. The company's latest moves include a partnership with Anduril Industries to boost AI training for military applications and a $36.8 million contract with the U.S. Special Operations Command (SOCOM). On December 6, Palantir confirmed its collaboration with Anduril to enhance artificial intelligence training in defense contexts. This partnership aligns with Palantir's mission of delivering big-data analytics that identify complex patterns and applications in security and privacy. Following this, on December 9, Palantir secured a contract with SOCOM to act as the lead software integrator for its Mission Command System. This deployment marks the first utilization of Palantir's Mission Manager platform within special operations units, suggesting significant potential in military applications. Palantir shifted its stock listing from the New York Stock Exchange to the Nasdaq Global Select Market on November 26, increasing its eligibility for the Nasdaq 100 index, which is closely monitored by passive investment funds. This strategic move could enhance shareholder value, as indicated by Wall Street veteran Stephen "Sarge" Guilfoyle, who described it as a step towards broader market appeal, according to a The Street report. Guilfoyle recently raised his price target for Palantir to $90, the highest among analysts, emphasizing the opportunities presented by its defense contracts and AI growth. The AI secret fueling Palantir's 134% stock explosion Despite these positive developments, Palantir's stock has experienced volatility, dropping 5.1% on December 9 amid a general decline across major U.S. indexes. Investors are weighing whether this downturn is a buying opportunity or foreshadows further declines. Meanwhile, analysts from Jefferies and Argus expressed skepticism regarding Palantir's valuation, downgrading the stock due to concerns about its fundamentals. Jefferies indicated that Palantir would need to sustain a 40% growth rate for four consecutive years to support its current price, which seems unlikely. As of December 10, Palantir's forward price-to-earnings ratio stood at a staggering 161, raising questions about whether the stock is overvalued relative to its peers. Investors should note that roughly half of Palantir's available shares are owned by individual investors, highlighting the company's broad appeal. The stock's closing price was $72.46 on December 9, reflecting notable gains over the year, with shares more than quadrupling through December 10. Analysts are cautious, forecasting a potential decline in Palantir's stock price. The consensus suggests a decline to approximately $39.57 within the next 12 months, pointing to an implied drop of nearly 50%. Given the current economic environment and pending macroeconomic data releases, further volatility could be on the horizon. Guilfoyle noted that upcoming announcements related to Palantir's inclusion in the Nasdaq 100 might impact its share price. With the index reconstitution scheduled for December 13, investors will be closely watching these developments. Disclaimer: The content of this article is for informational purposes only and should not be construed as investment advice. We do not endorse any specific investment strategies or make recommendations regarding the purchase or sale of any securities.

Prediction: Palantir Stock Will Soar After Dec. 13 (There's a Catch Though) | The Motley Fool

Palantir Technologies (PLTR -5.08%) is one of the most popular artificial intelligence (AI) stocks on the market. Shares have soared 345% year to date because of encouraging financial results and enthusiasm about its position in the burgeoning AI economy. That makes it the best-performing member of the S&P 500 (^GSPC -0.61%) in 2024. Last month, Palantir transferred its stock from the New York Stock Exchange to the Nasdaq Exchange. The company said it anticipated meeting the eligibility criteria for the Nasdaq-100, a growth-focused index that tracks the 100 largest non-financial companies listed on the exchange. The Nasdaq-100 is reconstituted annually in December. The additions and deletions are announced after the market closes on the second Friday of the month, and the changes take effect on the first trading day following the third Friday. The relevant dates this year are Dec. 13 and Dec. 23. Palantir is the largest Nasdaq-listed company not currently in the Nasdaq-100. So, the reconstitution announcement due on Dec. 13 will almost certainly include news of Palantir's inclusion in the index on Dec. 23. If that happens, history says the stock could soar during the next 12 months. The Nasdaq-100 is widely regarded as a benchmark for growth stocks, especially those in the technology sector. During the decade between 2014 and 2023, 85 companies joined the Nasdaq-100, and their share prices appreciated by an average of 17% during the 12-month period following their inclusion. Here's why that matters: If Palantir is added to the Nasdaq-100 later this month, history says the stock could soar 17% through December 2025. Of course, investor should never assume past performance will correlate with future returns, but there is some logic to that prediction. Index products have to buy: If Palantir is named to the Nasdaq-100 on Dec. 13, every investment product that tracks the index will need to buy the stock before Dec. 23. That would put upward pressure on the share price. Indeed, the Invesco QQQ Trust (which tracks the Nasdaq-100) ranks among the five most popular index funds in terms of assets under management. Palantir has momentum: There is another reason to think Palantir stock will soar following its inclusion in the Nasdaq-100. Every headline sends the price higher. In September, Palantir shares soared 14% in one day on news of its inclusion in the S&P 500. In November, the stock soared 11% in a single day when the company said it would relist on the Nasdaq Exchange. Importantly, while I believe Palantir will be added to the Nasdaq-100 and that shares will soar following the announcement on Dec. 13, that prediction comes with an important catch. I also think the stock is headed for a serious downward correction at some point in the future because the valuation is unsustainable. Palantir specializes in data analytics and artificial intelligence (AI) software. Its Foundry and Gotham products let commercial organizations and government agencies integrate complex data and machine learning (ML) models into analytical applications that improve decision-making. But AIP transformed the business following its release last year. AIP stands for artificial intelligence platform. That product brings support for large language models to Gotham and Foundry, which empowers customers to apply generative AI to their operations. Importantly, Forrester Research recently recognized Palantir as a leader in AI/ML platforms, a market forecast to grow at 41% annually through 2028, according to the International Data Corp. That bodes well for Palantir's business, but not even the best business is worth buying at any price. Wall Street expects Palantir's adjusted earnings to grow at 27% annually through 2025. That estimate makes the current valuation of 220 times adjusted earnings look unreasonable by any standard. It would be hard to rationalize even if earnings were projected to grow at 50% annually. Indeed, among the 20 analysts following Palantir, the median 12-month target price is $38 per share, which implies 50% downside from the current price of $76.50 per share. Median refers to the middle value, which means half of analysts think the stock will plunge more than 50% in the next year. In fact, even the highest price target of $75 per share implies 2% downside. That means every last analyst following Palantir thinks the stock is overvalued right now. That is a pretty good reason to avoid the stock, even though I think shares will soar following the company's likely addition to the Nadaq-100 later this month.

1 Unstoppable Artificial Intelligence (AI) Stock You'll Want to Own Next Year | The Motley Fool

At the time, the investment community was pretty torn on Palantir's prospects. On one side of the equation, the retail investing community was enamored with it -- thanks in large part to the company's CEO, Alex Karp. But on the other side, institutional money managers and Wall Street analysts remained widely skeptical, with many referring to it as a consulting firm or government contractor, and less so as a technology innovator. Over the last four years, Palantir has experienced many ups and downs. However, since the artificial intelligence (AI) revolution took the world by storm in late 2022, it has steadily climbed the ladder and emerged as a formidable leader in the space. Below, I'm going to explain how Palantir catapulted to leadership of the AI pack and explore several catalysts that should help continue generating growth over the long run. In early 2023, Palantir made a chess move for the ages. The company released its fourth major software product, the Artificial Intelligence Platform (AIP). Through immersive seminars called "boot camps," prospective customers can demo AIP and identify uses for the company's software while figuring out how it can fit into their broader technology stack. Over the last year and a half, AIP has become an absolute bellwether for Palantir, helping the company to reaccelerate its legacy government business by winning larger contracts, while simultaneously serving as a ticket into the private sector. AIP's widespread adoption has fueled a new phase of growth underscored by accelerating revenue, wider profit margins, and consistent positive net income and free cash flow. For several quarters, some skeptics put forth the idea that the company was only benefiting from the AI frenzy, and that it's growth could very well contract should artificial intelligence wind up being a bubble. But over time, this doubt-filled narrative has dissipated, and the business has finally joined some pretty exclusive company. For starters, it earned a spot in the S&P 500 earlier this year, and as of this writing, it is the best performing stock in the index in 2024. The combination of an encouraging growth outlook and entry into the S&P 500 has fueled institutional buying in the stock -- adding a layer of legitimacy to the company beyond being a darling of the retail community. More recently, Palantir switched from the NYSE to the Nasdaq. I think it is only a matter of time before the company joins another exclusive club: the coveted Nasdaq-100 index. Should this occur, it will be sitting among the world's leading growth stocks and technology companies in addition to the S&P 500, which I think will put it on even more radars. One of Palantir's most subtle catalysts come from strategic alliances. While you may think that AIP has some intense competition, consider that many of the world's largest technology businesses are choosing to partner with Palantir as opposed to competing head-to-head. Earlier this year, Microsoft and Oracle announced partnerships with Palantir, both of which will be integrating their respective cloud platforms with the company's foundational AI models. And just last month, Amazon and Meta Platforms also announced their own partnerships with Palantir AIP. I see big tech as a major contributor for Palantir's future as it looks to further penetrate core markets through AIP. Another way of saying this is that the boot camp strategy is only going to work for so long. To me, the partnerships referenced above add another source of generating leads for Palantir -- and these sources of growth are so new that they are yet to really bear much fruit for the company as of now. The one drawback I see with Palantir is its soaring valuation. At a price-to-sales ratio (P/S) of 66, it is the most expensive stock in the peer group listed below by a mile. Moreover, the company has experienced an unprecedented level of valuation expansion over the last two months in particular -- mainly driven by an impressive third-quarter earnings report and more announcements of how big tech is turning to AIP for its own benefit. Investing in Palantir right now is a tough call. In fact, some of Wall Street's most respected hedge funds have been taking profits and reducing exposure to the stock as of late. On the surface, I understand this approach. No stock moves up forever, and at some point, momentum just has to slow down. But at the same time, it's pretty clear that the company has some lucrative opportunities that aren't even accounted for in its actual growth yet. I think a reasonable approach could be to dollar-cost average into the stock at different price points over a long time horizon. While I fully acknowledge that there are more reasonable entry points for the company's shares, I think there is more upside from the company's catalysts than there is downside in a sell-off -- should one occur at some point. For long-term investors, I think Palantir is a no-brainer AI opportunity and deserves a spot in your portfolio heading into next year.

Should You Buy Palantir Stock Before Dec. 13? | The Motley Fool

2024 has been jam-packed with milestones for Palantir, but one more surprise could be in store following an important announcement next week. Palantir Technologies (PLTR 0.47%) has had an incredible run in 2024. The company has become one of the most talked about platforms fueling the artificial intelligence (AI) narrative, shares of the stock have gained more than 300% this year alone, and it's become a member of the S&P 500 index. But with just a few weeks left in the year, Palantir might have one last big milestone achievement up its sleeve. Below, I'm going to explain why Dec. 13 is an important date for Palantir investors. Let's break down what investors should be on the lookout for and assess if the stock is a good buy right now. This year, Dec. 13 falls on a Friday. And while Friday the 13th is usually affiliated with bad luck or superstition, Palantir investors may have some more good news headed their way. Next Friday, the Nasdaq-100 index is going to be reconstituted. This means that a new selection of companies will be added to the coveted index, replacing stocks that have fallen out of eligibility. This is important, because the Nasdaq-100 is generally affiliated growth stocks and lucrative opportunities beyond the S&P 500. On Sept. 6, Palantir announced that it had officially earned entry into the S&P 500. Since the date of that announcement, shares of Palantir have soared by 138% as of market close on Dec. 5. A few months later, Palantir announced that it was changing the stock exchange on which it trades -- moving from the New York Stock Exchange (NYSE) to the Nasdaq. Since joining the Nasdaq on Nov. 26, shares of Palantir have gained about 10% (as of market close Dec. 5). That's a pretty dramatic move in only seven trading days. In the press release regarding this announcement, management expressed that "upon transferring, Palantir anticipates meeting the eligibility requirements of the Nasdaq-100 Index." While history is no guarantee of future results, the stock's performance following its entry into the S&P 500 and its transition to the Nasdaq serve as a decent proxy for what investors could expect should the company earn a spot on the Nasdaq-100 on Dec. 13. I think there is a good chance Palantir will be added to the Nasdaq-100 next week and, should that occur, I'd be shocked if the stock doesn't move even higher. But while becoming a member of the Nasdaq-100 is a respectable milestone, such an achievement alone does not make Palantir stock a buy. Instead, investors should look at a combination of the company's growth outlook, Wall Street's take on the company's trajectory, and valuation. As far as Palantir's outlook and Wall Street's opinion are concerned, the company appears well on its way to continue accelerating its top line while growing margins and minting higher profits over the next several years. The primary catalyst fueling this growth is Palantir's Artificial Intelligence Platform (AIP), which has become a game-changing product development for the company over the last couple of years. As such, some of Wall Street's most respected analysts including Dan Ives of Wedbush Securities and Mariana Pérez Mora of Bank of America remain bullish on the stock. The only real concern I have surrounding an investment in Palantir at its current price comes down to valuation. To put it bluntly, a price-to-sales (P/S) multiple of 63.5 and a forward price-to-earnings (P/E) ratio of 149 are not even close to reasonable. In my eyes, the stock has run up so much that it's due for a pullback sooner rather than later. But with that said, I see any potential sell-off as one that will be short-lived, as it will probably be driven by investors taking profits as opposed to panic-induced selling should Palantir face some sort of crisis -- which, as of now, doesn't look likely. While the prospects of inclusion on the Nasdaq-100 is exciting, it's really just another potential milestone in what I see as a long line of more accomplishments to be achieved for Palantir over many years. All told, I'd encourage investors to monitor Palantir and look to use a strategy leveraging dollar-cost averaging over a long-term horizon.

Prediction: This Popular Artificial Intelligence (AI) Stock Will Fall Hard in 2025 | The Motley Fool

Being a successful investor requires just a few skills: knowing when to buy and knowing when to sell. Although it sounds simple, you'll have incredible returns if you're the best at both. There's one popular artificial intelligence (AI) stock that was a buy at the beginning of the year that has now moved into the sell category. That's Palantir (PLTR 6.22%). Palantir has been an incredible success in 2024, with the stock price more than quadrupling. However, the stock has become disconnected from the business, and I think there's a high likelihood that it could come falling back down to earth in 2025. As a result, it's best that investors take their profits and run. The unfortunate thing about Palantir's business and stock becoming disconnected is that it is doing incredibly well and will likely maintain that status quo throughout 2025 and beyond. Palantir's application-specific AI models aid their clients in decision-making and have found heavy usage in the commercial and government sectors. One of its newer products that has quickly emerged as one of its most popular is its Artificial Intelligence Platform (AIP). AIP allows its clients to build AI applications into their workflows rather than using it as a tool on the side. This allows businesses to control the data that gets plugged into these AI models rather than having it go to a third-party AI platform, which could present an issue when sensitive information that the government deals with is used. Since the AI arms race kicked off, Palantir's AI products have seen a surge in demand, which has translated into strong performance for the company. In Q3, Palantir's revenue rose 30% year over year to $726 million. U.S. clients spent more than their international counterparts, with U.S. commercial revenue rising 54% year over year to $179 million and U.S. government revenue rising 40% year over year to $320 million. Palantir is also solidly profitable, posting a profit margin of around 20% for the second straight quarter. With just this information, it's understandable why Palantir has received a lot of investment interest. It's growing rapidly in an area that investors are focused on right now. Palantir is doing incredibly well as a business, and I predict strong results for 2025. The problem is that its stock has disconnected from these fundamental results. As mentioned earlier, Palantir's stock is up by over 300%, yet its revenue growth is a tenth of that. As a result, the stock has become highly valued, trading at an unbelievable valuation. At 64.5 times sales, Palantir has eclipsed the highest level Nvidia traded at over the past three years (45 times sales). Despite significantly lower profit margins and far slower growth, it has done this. When Nvidia achieved that valuation, it tripled its revenue the following quarter. At Palantir's current growth rate (30%), it would take over four years to triple its revenue. No part of Palantir's valuation makes sense, which is unfortunate because the company is doing so well. Let's take a second to assess the absolute best-case scenario for Palantir. It would include these factors: If Palantir achieved these four items, the stock price would have to stay at its current level for over four years to achieve the 50 times trailing earnings valuation. All of these are extremely aggressive assumptions that likely won't come true, further illustrating how expensive Palantir's stock has become. As a result, I think there's a very high likelihood that Palantir's stock will crash sometime in 2025. There is just too much growth baked into the stock for its current growth levels, and investors will eventually decide to take profits en masse, which will cause the stock to struggle even if the business is doing well.

Prediction: 2 Stocks That Will Be Worth More Than Palantir Technologies 1 Year From Now | The Motley Fool

Palantir Technologies (PLTR 6.22%) has witnessed a tremendous increase in its market value in 2024 thanks to a remarkable surge of 313% in the company's stock price so far this year. The company has a market cap of $162 billion as of this writing, up from around $35 billion at the beginning of the year. However, a closer look at Palantir's valuation indicates that it may have run ahead of itself. The software platform specialist has a price-to-sales ratio of a whopping 63, while its trailing earnings multiple stands at 345. Not surprisingly, Wall Street isn't expecting much upside from the stock over the next year. The 20 analysts covering Palantir have a 12-month median price target of $38, which would be a 46% drop from current levels. If that does indeed happen, its valuation could drop big time in the coming year. Of course, the company may be able to justify its expensive valuation thanks to the rapidly growing demand for artificial intelligence (AI) software platforms, a market where it is the leading player. But if cracks emerge in Palantir's growth story, especially as stiff competition grows from bigger and smaller players in the enterprise AI software space, there is a good chance investors will start booking profits -- leading the stock to fall. This could pave the way for Arm Holdings (ARM 2.13%) and Applied Materials (AMAT 0.57%) to overtake Palantir's valuation in the next year. Let's see why these two companies may be worth more than Palantir in 2025. With a market cap of just under $148 billion, Arm Holdings isn't very far from Palantir's valuation. And Arm stock has delivered impressive returns of 87% in 2024 due to the important role the company plays in the global semiconductor market. Arm licenses its architecture and intellectual property (IP) to semiconductor companies and consumer electronics manufacturers so that they can develop different types of chips such as central processing units (CPUs), graphics processing units (GPUs), and microprocessors, among other things. The company's chip architecture is used across multiple industries including smartphones, data centers, computers, and automaking. Arm enjoys a healthy market share in many verticals. For instance, in mobile applications, it has a market share of more than 99%. Its share of the consumer electronics chip market stands at 30%. Even better, it is gaining ground in fast-growing niches such as cloud computing and networking equipment, where it now commands 15% and 28% market shares, respectively, as compared to 9% and 23% a couple of years ago. And its share of the automotive chip market has increased to 47% from 43% in a couple of years. In all, Arm estimates that its architecture and IP control 47% of the global chip market's $214 billion value. The company expects to benefit from the growing complexity of chips deployed in its end markets thanks to the emergence of technologies such as AI. And that's why it has seen an increase in demand for its architecture licenses. It ended the second quarter of fiscal 2025 with 39 Arm Total Access licenses, up from 33 in the preceding quarter. The number of Arm Flexible Access licensees increased to 269 from 241 in the preceding quarter. This increase in the number of licenses it's selling bodes well because chips developed using these licenses will result in royalty revenue. The company already gets around 50% of its royalty revenue from chip architectures launched more than 10 years ago. Management expects its revenue in the current fiscal year to jump to $3.95 billion from $3.23 billion in fiscal 2024, an increase of 22%. Its earnings guidance of $1.55 per share would be a 22% increase from fiscal 2024 levels of $1.27 per share. The company's growth is expected to accelerate in the next fiscal year, with revenue predicted to jump 25% to $4.93 billion and earnings expected to increase by 32% to $2.05 per share. Analysts forecast this stronger growth will lead to more upside for the stock. The 12-month median price target of $160 would be a 14% jump from current levels. As such, there is a good chance that it could overtake Palantir's valuation next year, especially considering that Arm's earnings growth then is expected to be stronger than Palantir's estimated bottom-line growth of 25%. Applied Materials hasn't set the stock market on fire in 2024, having gained just 13% so far this year, but 2025 could be much better for the company. Global spending on semiconductor equipment is expected to increase by a much faster pace of 24% in 2025 following a 4% increase this year, according to the industry association SEMI. Applied Materials sells manufacturing equipment and provides services and other software for the semiconductor and display industries. The company's revenue in fiscal 2024 (which ended on Oct. 27) increased just 2% to $27.1 billion. Its adjusted earnings, on the other hand, jumped 7% to $8.65 per share. Consensus estimates are projecting a 9% increase in its revenue in the current fiscal year to $29.6 billion, along with a 10% increase in earnings to $9.54 per share. And there is a good chance the company has stronger growth thanks to the rising demand for AI-related chipmaking equipment. Management said on its November earnings conference call that the booming demand for memory capacity in AI data centers led to a 60% increase in the company's sales of DRAM (dynamic random-access memory) equipment in fiscal 2024. This trend is likely to continue as the demand for high-bandwidth memory (HBM) that's deployed in AI data centers is expected to double next year. At the same time, Applied Materials is likely to benefit from the transition to more advanced chipmaking technology for tackling AI workloads, which should increase its addressable market substantially. All this tells us why analysts are upbeat about the company's prospects over the next year. The stock carries a 12-month median price target of $225, which would be a 23% increase. Given its current market cap of almost $151 billion, it won't be surprising to see it overtake Palantir's valuation over the next year. Applied Materials trades at just 19 times forward earnings. So, if the market decides to reward its stronger growth with a richer valuation, the stock could easily deliver stronger gains than analysts are estimating.

Prediction: This Spectacular Artificial Intelligence (AI) Stock Will Be Worth More Than Palantir by 2030 | The Motley Fool

Two of this year's hottest stocks are both darlings of the artificial intelligence (AI) movement. Data analytics software developer Palantir Technologies (PLTR 6.22%) and cybersecurity specialist CrowdStrike (CRWD 0.22%) have been in the spotlight for much of 2024 -- albeit for much different reasons. While Palantir has finally proven that it is a rising star in the enterprise software arena, CrowdStrike's reputation took a major blow earlier this year after a glitch in its platform caused unprecedented outages for many of its customers. Nevertheless, I remain bullish on CrowdStrike's long-term narrative -- so much so that I think the company could be worth more than Palantir by the next decade. Below, I'm going to illustrate Palantir's rapid ascent to the top of the AI software realm and break down how CrowdStrike could emerge as the more valuable company in the long run. At the time of this writing, Palantir stock has gained 287% in 2024 and is the second-best performing stock in the S&P 500. The primary driver behind Palantir's surge is immense demand for its Artificial Intelligence Platform (AIP) software. Until the release of AIP, Palantir was widely regarded by skeptics as a consulting operation for the federal government with limited software capabilities. But over the last year, Palantir has flipped that narrative right on its head. Over the last 12 months, Palantir has increased its customer count by 39%. Yet more impressively, the company has swiftly penetrated the private sector, growing its commercial customer count by over 50% for the trailing-12-month period ended Sept. 30. The obvious benefit of increased customer counts is accelerated revenue. But what makes an investment in Palantir even more special is the company's ability to expand margins and begin generating positive free cash flow and net income in tandem with rising revenue. All of these factors make Palantir look like a no-brainer investment opportunity... that is, until you take a look at the chart below. The clear outlier in the chart above is that Palantir's price-to-sales (P/S) ratio of 65 is not only the highest among this cohort, but is nearly triple the next closest comparable business. While it can be argued that Palantir deserves a premium multiple, the stock has experienced outsize valuation expansion during an otherwise short time period. Candidly, I think it's this very dynamic that is causing some hedge funds to materially trim their exposure to Palantir and take profits. I'll get the obvious point out of the way up front: CrowdStrike is by no means a cheap stock. Even with the material sell-off that was driven by the security outage over the summer, the stock still trades at a meaningful premium above its peers. Nevertheless, I see some key differences between an investment in CrowdStrike and one in Palantir. As I previously explored, CrowdStrike was in rare company a few years ago during the height of the COVID-19 pandemic. In fact, demand for CrowdStrike's products actually rose during the COVID-19 recession. I see two reasons for this. The obvious reason is that work-from-home protocols became the norm during peak pandemic days. As such, businesses needed to double down on cybersecurity protocols on work-issued devices during this phase of remote work. However, taking this a step further, I'd argue that CrowdStrike is positioned well during just about any economic cycle because investment in cybersecurity is increasingly becoming a non-negotiable. In other words, while data analytics is important, Palantir's value proposition becomes harder to justify during tough times when budgets are tight. In my eyes, the same cannot be said for cybersecurity. CrowdStrike's security outage incident occurred on July 19. About a month later, the company reported earnings for its second quarter of fiscal 2025 (ended July 31). To me, the most important figure in that report was annual recurring revenue (ARR), which clocked in at $3.9 billion. Fast forward to Q3, when CrowdStrike ended the quarter with just over $4 billion in ARR. Despite any reputational damage from the outage, CrowdStrike has still managed to grow its ARR over the last two quarters. I think this is a testament of the company's superior products, and the heavy reliance its customers have on CrowdStrike's security backbone. At the end of the day, I think both Palantir and CrowdStrike are pricey stocks. However, Palantir's valuation is stretched and the stock is overbought. As such, the company has to prove that it can grow into this premium valuation -- which will be no easy feat given how intense the enterprise software landscape is. Over time, it could become more challenging to compete with existing software providers even if Palantir does have the superior product. Palantir's ability to scale in the long run could all boil down to pricing compared to competing platforms. By contrast, I think businesses are going to continue increasing investment in cybersecurity as threats of fraud and ransomware rise and become more sophisticated. Given CrowdStrike's proven ability to grow during difficult economic times such as recessions as well as challenging business-specific periods (i.e. the outage), I think the company is positioned to accelerate sales, expand margins, and compound profits over the next several years. For these reasons, I think CrowdStrike has a better chance of experiencing an expanded valuation from current levels and could surpass that of Palantir should the software developer show any sign of protracted growth.

Should You Forget Palantir and Buy These 2 Artificial Intelligence (AI) Stocks Instead? | The Motley Fool

Having nearly quadrupled this year while also joining the S&P 500 index, Palantir (PLTR 6.22%) has no doubt gained a lot of investor attention. However, with the stock trading at a very frothy valuation and insiders selling, the question is should investors turn their attention to other companies that are benefiting from artificial intelligence (AI)? The biggest knock on Palantir is not its business, which has been seeing accelerating growth as commercial and government customers begin adopting its AI platform, but a valuation that has ballooned to a forward price-to-sales (P/S) multiple of 45.7 times analyst estimates for 2025 revenue, and a staggering 147 times forward price-to-earnings (P/E) ratio, as of this writing. That's a valuation well above where SaaS companies traded at their heights back in 2020-2021. Insiders, meanwhile, have aggressively been selling shares in recent months, including CEO Alex Karp and Chairman Peter Thiel, among others. Against that backdrop, let's look at two cheaper AI stocks growing revenue at a similar rate as Palantir that investors could consider as alternatives. For those unfamiliar with AppLovin (APP 5.92%), it is an adtech company for the mobile gaming industry. It also owns a legacy portfolio of apps as well. AppLovin has been growing its revenue at a faster pace than Palantir, with revenue growth of 39% last quarter compared to 30% for the latter. The company's strong growth stems from its Axon-2 AI-powered adtech platform, which has helped transform how mobile gaming app companies attract new users and better monetize their games. Since its launch in the second quarter of last year, AppLovin has seen tremendous growth from its software platform business, as existing customers have spent more money on its platform and its gained new customers. More importantly, from an investing standpoint, while AppLovin's stock have has actually outperformed Palantir this year, up about 750% as of this writing, it continues to trade at a much more reasonable forward price-to-earnings (P/E) of 54 based on 2025 analyst estimates, and a price/earnings-to-growth (PEG) of 1.2. APP PE Ratio (Forward 1y) data by YCharts. A PEG ratio of under 1 is generally considered undervalued, but growth stocks such as AppLovin will often command multiples well above 1. Similarly, the stock is tradeing at a more modest 22.5 times next year's expected sales. AppLovin appears to have clearly taken business away from rival Unity Software, whose similar Grow Solutions segment saw revenue fall 5% last quarter to $298 million. That compares to the 66% year-over-year growth in revenue to $835 million that AppLovin saw for its software platform revenue. Going forward, the company thinks it can grow its mobile gaming customer revenue by between 20% to 30% a year. However, it has a huge opportunity as it looks to extend its platform into other verticals, starting with e-commerce. The company has begun piloting this solution with early strong results, and management expects it to be a meaningful contributor to revenue next year. If AppLovin's Axon-2 adtech platform can successfully move beyond mobile gaming and into the broader e-commerce category, there should be strong continued upside in its stock. While Palantir and AppLovin stocks have had great years, the same can't be said for SentinelOne (S 3.58%), whose shares are about breakeven on the year as of this writing. However, the company continues to have strong potential moving forward. SentinelOne is a cybersecurity company whose Singularity Platform uses AI to predict, monitor, and eliminate threats. It can be deployed in public, private, or hybrid cloud environments and is an endpoint protection solution that is a rival to CrowdStrike. One of the company's big selling points is that its platform can automatically roll back any changes to before an attack occurs. This feature has gained more attention after the major CrowdStrike outage, as CrowdStrike customers had to implement time-consuming manual fixes that crippled their businesses, such as Delta Airlines, which has sued CrowdStrike for the loss of $500 million in revenue. For its part, CrowdStrike has countersued its customer, claiming that it was Delta's own negligence that led to its issues. SentinelOne had already been growing its revenue quickly before the incident, with revenue growth of 36% in the first half of its fiscal year ended July 31. Given its size, any additional business that comes its way as a result of the CrowdStrike outage will be a big bonus. Meanwhile, earlier this year the company scored a major win when it agreed to a deal with Lenovo to provide endpoint security for all the new personal computers (PCs) it sells. Lenovo is the world's biggest PC vendor with about a 25% market share, selling approximately 59 million PCs last year. Lenovo will also give current customers the option to upgrade their security to SentinelOne's Singularity Platform, and it will build a new Managed Detection and Response (MDR) service using AI and EDR (endpoint detection and response) capabilities based on SentinelOne's Singularity Platform. The Lenovo deal and any additional business that may come its way as a result of the CrowdStrike outage should power SentinelOne's growth in 2025 and beyond. Meanwhile, the stock is not pricey, trading at a P/S multiple of under 8.5 with over 30% revenue growth. S PS Ratio (Forward 1y) data by YCharts. The combination of strong growth and an attractive valuation make SentinelOne an alternate AI investment to consider.