Palantir's AI-Driven Growth Sparks Debate on Wall Street Amid Soaring Valuation

Should You Buy Palantir Technology Stock Before Dec. 13? Wall Street Has a Compelling Answer That Might Surprise You. | The Motley Fool

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 2.89%). 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. 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%. 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. 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. 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.

Is Palantir Stock a Buy After a Stellar Quarter? | The Motley Fool

Palantir Technologies (PLTR 0.47%) has been in the news for all the right reasons. On Nov. 4, the company reported stellar third-quarter earnings results. Then, on Nov. 14, the company announced plans to shift its listing from the New York Stock Exchange to the tech-heavy Nasdaq Global Select Market exchange. That occurred on Nov. 26. Palantir has also highlighted expectations of joining the Nasdaq-100, which could bring more index-tracking investors. Wall Street has rewarded Palantir's achievements, and the stock is up by 274% in 2024 as of this writing. This includes over 50% gains since the company's earnings results, despite a slight pullback associated with profit-taking. Analysts, however, are becoming cautious of this high-flying artificial intelligence (AI) stock. Among the 24 analysts covering Palantir stock that The Wall Street Journal tracks, the median target price is $38, implying a downside of 41% at the time of this writing. While it is undeniable that Palantir is a high-quality data mining stock with robust AI-powered tailwinds, the company's sky-high valuation -- a price-to-sales ratio near 60 -- requires investors to exercise caution. Here's what astute investors should know about Palantir. Palantir's Artificial Intelligence Platform (AIP) has been focused on resolving real-time challenges for businesses. AIP differentiates itself from the competition by leveraging its "ontology" -- a digital twin of the organization demonstrating relationships between various digital data sets and models with their real-world counterparts -- and deploying open-source and closed-source AI models. AIP is already helping several businesses improve productivity and efficiency while reducing costs. And AIP's unique go-to-market strategy has paid off. Instead of opting for pilot projects, which can take months for actual client conversions, Palantir focuses on demonstrating the real-world utility of AIP to companies using their data. It calls these sessions with potential clients boot camps. This, in turn, has enabled AIP to rapidly win customers (within less than two months) and convince customers to expand existing contracts. Once known mainly as a software company helping military and government agencies derive insights from huge data troves, Palantir is now increasingly making its presence felt in the commercial segment. The company's success in effectively implementing AI solutions is playing a pivotal role in driving the growth of its commercial business. In the third quarter, the company's total commercial customer count grew by 39% year over year to 629 customers. U.S. commercial customer count grew at a much faster pace, by 77% year over year to 321. Palantir expects commercial revenue to be more than $687 million in fiscal 2024, implying year-over-year growth of at least 50%. Palantir's government business is also seeing strong momentum, partly driven by the rapid adoption of AI solutions by government agencies. Revenue in the segment rose 33% year over year to $408 million in the third quarter. Here again, U.S. government business revenue grew faster, at 40% year over year to $320 million, mainly driven by increasing adoption of the company's services by the U.S. Department of Defense. The company has also partnered with defense contractors such as L3Harris, Anduril, and Shield AI to further strengthen its market position in the government segment. With Palantir's U.S. government business recording the strongest growth in 15 quarters in the third quarter, reacceleration of government revenue can help the company build a well-diversified revenue base. The company's focus on national security and defense can also open new revenue streams. Palantir's business success is well reflected in its recent financial performance. Revenue was up by 30% and exceeded the higher end of company guidance by 450 basis points. The company also recorded a robust 58% adjusted operating margin and 60% free-cash-flow margin. Palantir also has a strong balance sheet with $4.6 billion in cash and negligible debt, giving it sufficient flexibility to invest in new projects. Despite the many pros, Palantir's exorbitant valuation does not seem justified. The company is trading at a price-to-sales ratio near 60 -- higher than Nvidia's 31. Although Palantir is one of the best AI stories in the market, considering its sky-high valuation, coupled with significant execution risks, it seems prudent for astute investors to wait for a pullback before picking up a stake in this stock.

Is Palantir Stock a Buy Now? | The Motley Fool

Shares of Palantir Technologies (PLTR -1.56%) more than tripled over the last 12 months, with most of that gain coming in just the last three months. Since the beginning of September, the stock has rocketed 134% at the time of this writing and commands a rich valuation of 64 times trailing-12-month revenue and 187 times this year's consensus earnings estimate. It's fair to say Palantir might be the most loved artificial intelligence (AI) stock on Wall Street right now. Even AI chip leader Nvidia, which just posted a 94% year-over-year increase in quarterly revenue, trades at a much lower price-to-earnings ratio than Palantir. Successful investing is often about shopping around for the strongest growth at the lowest valuation. As with shopping for anything else you might want to buy, the stock market is the same: You want to find the best quality at the lowest price. Is Palantir stock worth buying at these lofty highs? It's a relatively small company going after a massive AI opportunity. Let's explore further why investors are willing to pay a premium for the stock, and whether you should buy now or wait for a better price. The reason investors are paying such a high valuation for Palantir is quite simple. AI is redefining the business landscape in the 21st century. The company is winning big corporate deals in droves, which is accelerating revenue growth. Its product is so good that the government trusts it to handle classified information across military and intelligence operations. Because of these capabilities, the company can price its software to earn high profit margins. Over the last year, revenue growth steadily improved from 13% in the third quarter of 2023 to 30% a year later. Palantir has been successful with its "boot camps," where customers can see the product in action and how it can be implemented in their operations. This is shortening the deal cycle and helping drive the acceleration on the top line. Drilling down a little further into its revenue performance, U.S. commercial revenue grew 54% year over year in the third quarter, while the U.S. government revenue grew 40%. This is a notable improvement in the government business, which posted a revenue increase of just 12% year over year in the third quarter of 2023. Optimism in Palantir's prospects is further supported by stellar margins. It reported $144 million of net income last quarter, bringing its net profit margin to 20% for the quarter and 18% on a trailing-12-month basis. Growing free cash flow, which measures the actual cash a business produces after capital expenditures, is also a good indicator that the company is generating quality profits that are not being manipulated by accounting maneuvers. Palantir's free cash flow totaled $980 million over the last year, which represents an even higher margin on revenue of 37%. But even with that high free cash flow margin, it may not be enough to support the company's $161 billion market cap. At a price-to-free-cash-flow multiple (P/FCF) of 174, the business could double its FCF overnight, and the stock would still look expensive at a P/FCF multiple of 85. I wouldn't buy a stock going parabolic at this valuation. Palantir has been volatile over its trading history, so the chances are good that the stock will settle down at some point and offer investors a more reasonable valuation to start buying it.

Meet the Newest Stock in the Nasdaq. It's Soared 918% Since Last Year, and It's Still a Buy Right Now, According to Certain Wall Street Analysts. | The Motley Fool

This artificial intelligence (AI) pioneer announced its move to the Nasdaq after years of impressive growth. The Nasdaq Composite is a comprehensive technology-focused index that tracks the performance of more than 3,000 stocks listed on the exchange. Earlier this month, the index hit (another) all-time high, marking the 27th so far this year. After its recent sprint higher, the Nasdaq is taking a well-deserved respite, down about 1% from its peak (as of this writing). Some investors are concerned that the rally has lost its momentum, but many on Wall Street believe the bull market still has room to run. Palantir Technologies (PLTR 1.56%) is the most recent addition to the Nasdaq, joining the tech-centric index on Nov. 26. This follows the company's recent admission to the S&P 500, making it one of just 11 companies afforded that honor so far this year. The decision came down to performance. Since the advent of generative AI early last year, Palantir stock has surged 930% (as of market close on Wednesday), as its AI expertise fueled robust revenue and profit growth. Given the stock's parabolic move higher, some investors are leery of Palantir's sky-high valuation. However, a couple of Wall Street veterans have recently chimed in and believe there's still upside ahead. Let's look at the catalyst that sparked Palantir's sprint higher and see if there's additional growth on the horizon. Palantir has been at the forefront of AI technology for more than 20 years. The company's expertise came from crafting novel AI solutions for U.S. intelligence, military, and law enforcement agencies. The ability of its systems to make connections between seemingly unrelated data points helped thwart terror plots and bring criminals to justice. The company realized the value of its algorithms and quickly pivoted to embrace enterprise-facing applications as well. Palantir's data mining and analytics software sifts through data, providing companies with actionable intelligence. When AI went viral early last year, many businesses were eager to adopt these cutting-edge algorithms and benefit from the promises of improved productivity and increased profits. However, many lacked the necessary expertise needed to bring these technological advancements to bear. Seeing an opportunity, Palantir created its Artificial Intelligence Platform (AIP), a generative AI system that provides solutions based on company-specific data and situational analysis. In a demo video, Palantir illustrates how AIP leverages company-specific information to help a manufacturing company minimize the impact of a hurricane hitting its distribution center. The AIP terminal examines existing orders, suggesting which ones to delay, cancel, or accelerate, and which shipments can be handled by other distribution centers. It also estimates the impact of those actions on the company's sales, order backlogs, and profits. To demonstrate the value of its offerings, Palantir hosts boot camps. In these hands-on sessions, customers are paired with Palantir staff to develop applications to solve real-world problems. Palantir's results show this strategy has struck a chord with users. In the third quarter, the company signed 104 deals valued at least $1 million. Of those, 36 brought in at least $5 million, and 16 were worth $10 million or more. Perhaps more telling is that many contracts were signed within weeks of attending a Palantir-hosted boot camp. The overall results tell the tale. In the third quarter, Palantir's revenue of $726 million grew 30% year over year. This marked the company's eighth consecutive quarter of profitability, a major contributing factor in its admission into the S&P 500. Palantir's U.S. commercial revenue, which houses AIP, grew 54% year over year, while its customer count rose 77%. At the same time, the segment's remaining deal value (RDV) soared 73%. When RDV is growing faster than revenue, it shows an upward trajectory of future growth. The company's AI expertise and innovative training sessions illustrate why Palantir is a leader in its field. No discussion about Palantir would be complete without addressing its valuation. The stock is currently selling for 175 times forward earnings and 43 times forward sales, which appears ridiculously expensive -- at least at first glance. However, the most commonly used valuation metrics fall short when evaluating high-growth companies. Applying the more appropriate forward price/earnings-to-growth (PEG) ratio -- which factors in Palantir's accelerating growth rate -- the valuation comes in at 0.45, when any number less than 1 is the benchmark for an undervalued stock. Yet Wall Street remains divided. Of the 19 analysts who offered an opinion in November, four rate it a buy or strong buy, eight rate it a hold, and seven rate it underperform or sell. That said, I'm not the only one who believes Palantir stock is a buy, and several Wall Street veterans have recently chimed in. Greentech Research analyst Hilary Kramer believes Palantir "easily can be" a $100 stock," which represents potential upside of 51% compared to Wednesday's closing price. The analyst believes the company's accelerating revenue and profit growth will cause many on Wall Street to rerate the stock. Just this week, Wedbush analyst Dan Ives called Palantir's AIP strategy "game changing," while maintaining an outperform (buy) rating and increasing its price target to $75, or roughly 14% upside from Wednesday's closing price. BofA analyst Mariana Perez Mora also rates the stock a buy, boosting her price target to $75, calling Palantir "the enabler and winner in this new era," going on to say it's "poised to dominate." Those who believe the stock is still too expensive should consider dollar-cost averaging as a way to accumulate shares over time, while also getting a more attractive entry price. To be clear, Palantir stock won't be a fit for every portfolio, particularly those of value-minded investors. However, for those with the stomach for some risk and the potential for volatility, Palantir deserves a look as one of the few pure plays in AI delivering robust growth.

Palantir Stock Could Plunge 40% Over the Next 12 Months, According to Wall Street. Are Analysts Right About This AI Stock? | The Motley Fool

What's the best example of a stock benefiting from the recent election results? Palantir Technologies (PLTR -1.03%) should rank near the top of the list. Shares of the artificial intelligence (AI) and data analytics software company have nearly quadrupled in value year to date. Much of this gain (although certainly not all of it) has come since the election on Nov. 5, 2024. However, this tremendous performance could soon come to a screeching halt. Some on Wall Street predict that Palantir stock is headed down instead of up. The average analysts' 12-month price target for Palantir is $39.57, based on data compiled by financial markets infrastructure and data provider LSEG. That's more than 40% below Palantir's current share price. Sure, one analyst is especially downbeat about Palantir with a 12-month price target of $11. This ultra-bearish target pulls down the average to some extent. However, one outlier isn't enough by itself to make the average price target for the stock so bearish. The reality is that there is a negative sentiment about this high-flying stock among many on Wall Street. Seven of the 19 analysts surveyed by LSEG in December rate Palantir as an "underperform" or a "sell." Another eight analysts recommend holding the stock. Only four rate Palantir as a "buy" or a "strong buy." In November, two analysts downgraded Palantir stock. The last upgrades for Palantir reported by LSEG came all the way back in February 2024. Analysts don't have good reasons to be pessimistic about Palantir's business. The company's total revenue soared 30% year over year in the third quarter of 2024 and rose 7% sequentially. Its GAAP earnings per share (EPS) doubled year over year, while adjusted EPS jumped 43%. During Q3, Palantir closed 104 deals valued at over $1 million. Thirty-six of those deals were for at least $5 million. One especially important contract for the company was a five-year deal of up to $100 million to expand Maven Smart System AI/machine learning capabilities for the U.S. military. While Palantir is best known for its government business (the U.S. government is its largest customer), the company also has thriving commercial operations. In Q3, Palantir's number of commercial customers jumped 51% year over year, with the number of U.S. commercial customers soaring 77%. So why do some analysts think Palantir's share price will fall? The price is higher than the company's admittedly strong business prospects warrant. According to reports, Jefferies' downgrade of the stock last month was primarily due to concerns about an unsupportable valuation. Palantir's shares currently trade at nearly 145 times forward earnings. Could the company's growth justify such a sky-high premium? Not according to the consensus of analysts surveyed by LSEG. The stock's price-to-earnings-to-growth (PEG) ratio based on five-year earnings growth projections is 3.0, which is also a high multiple. I don't know if Palantir's share price will fall 40% over the next 12 months. It wouldn't surprise me if the stock continued to climb over the near term. But are Wall Street's concerns about Palantir's valuation reasonable? I think so. Granted, Palantir will almost certainly deliver impressive revenue and earnings growth over the next few years. The company's technology is likely to enjoy strong demand, especially if there's a focus in the next presidential administration on improving efficiency across government agencies and aggressively beefing up immigration enforcement. I fully expect Palantir's commercial business to prosper as well. However, I'm squeamish about predicting that Palantir will deliver growth at the levels needed to justify a forward earnings multiple right now of 145. This stock is priced for perfection -- and companies rarely execute perfectly.

Why Palantir Technologies Stock Surged 61% in November | The Motley Fool

The catalyst that initially lifted the stock last month was the artificial intelligence (AI) and data mining specialist's blockbuster financial results, but other more recent developments helped fuel its ongoing rally. In the third quarter, Palantir's growth accelerated for the fifth consecutive quarter, while its streak of uninterrupted profitability continued. Revenue of $726 million grew 30% year over year, driving earnings per share that soared 100% to $0.06, making its eighth consecutive quarter of profitability -- but that tells just part of the story. The primary driver of its growth is Palantir's Artificial Intelligence Platform (AIP), which uses company-specific data to solve real-world business problems. The company hosts boot camp sessions, which pair customers with Palantir engineers to ensure they get the most bang for their buck. These have been so successful that U.S. commercial revenue -- which includes AIP -- jumped 54% year over year. Furthermore, the segment's customer count rose 77%, pushing its remaining deal value (RDV) up 73%. When RDV is growing faster than revenue, it illustrates the upward trajectory of future growth. It didn't hurt that Palantir increased its full-year guidance for the third time in as many quarters. Investors cheered the results, and Wall Street scrambled to update its projections. In the wake of its robust results, several analysts boosted their price targets to new highs. Wedbush analyst Dan Ives was among the most bullish, maintaining a buy rating and increasing his price target to $75, which represents about 13% upside compared to Monday's closing price. Ives wrote, "Under a Trump Administration, we expect major AI initiatives within the U.S. government, including the Department of Defense, that would also be a major tailwind from AI players like Palantir." That's in addition to any headwinds from the commercial adoption of AI. The final factor that helped fuel Palantir's rise was the announcement that Palantir was transferring its stock to the Nasdaq exchange, effective Nov. 26. This followed the company's addition to the S&P 500 in September. In a press release, Palantir noted that it "anticipates meeting the eligibility requirements of the Nasdaq-100," adding: "If that occurs -- and we don't yet know if it will -- it won't have any impact on the company's operating or financial results, but it could increase demand for the stock. Index and exchange-traded funds that track the index will need to buy Palantir shares if it's added to the index, putting upward pressure on the stock price. As with so many things, there's no one answer to the question, "Is Palantir a buy?" Much of that determination will depend on who you are as an investor. The stock currently trades for 175 times forward earnings and 43 times forward sales, which is enough to send some investors running for cover. However, the most-often used valuation metrics fail to factor in Palantir's accelerating growth. Applying the more appropriate forward price/earnings-to-growth (PEG) ratio -- which takes into account Palantir's soaring growth rate -- its valuation comes in at 0.54, when any number less than 1 is the standard for an undervalued stock. For investors who have an appropriate long-term investing time horizon and a cast-iron constitution, Palantir is worth a look, despite its lofty valuation.

Palantir's Wild Ride: Is AI Star Set For Pullback Or New Rally? - Palantir Technologies (NASDAQ:PLTR)

Overvaluation concerns arise as analysts predict a potential 46% correction despite bullish technical signals. Palantir Technologies Inc PLTR has been the toast of Wall Street in 2024, skyrocketing 300% year-to-date. Its AI-driven growth story, fueled by blockbuster demand for its Artificial Intelligence Platform, has investors buzzing. But with great heights come great risks -- is this high-flyer due for turbulence? The Bull Case: AI Gold Rush Palantir's financials sparkle brighter than a supercomputer's dashboard. Third-quarter revenue surged 30% to a record $726 million, marking six straight quarters of accelerating growth. Its adjusted operating margin hit an impressive 38%, and free cash flow topped $1 billion over the past year. A dual-market strategy has powered this surge. Government contracts rose 33%, while the U.S. commercial segment exploded by 54%. With AI adoption reshaping industries, Palantir's next-gen AIP solutions seem poised to capitalize on the ongoing tech revolution. Even analysts skeptical of its valuation can't ignore its momentum. Read Also: Palantir's YTD Returns Surge 298%: Here's How ETFs With Exposure To Alex Karp's Company Have Performed The Bear Case: Sky-High Expectations At a price-to-sales ratio of 60.35 (according to Benzinga Pro data), Palantir is leagues above its peers. Wall Street's average price target of $63.67 implies a potential 4.6% drop. Hedge fund Citadel, helmed by Ken Griffin, recently slashed 91% of its Palantir stake, signaling concern about valuation sustainability. Chart created using Benzinga Pro Technical indicators also send mixed messages. PLTR stock is firmly above its key moving averages, reinforcing bullish sentiment. However, with an RSI of 71.89, the stock is firmly in overbought territory, hinting at potential cooling ahead. Pullback Or Rally? Palantir shines as a leader in the AI gold rush, and its fundamentals remain stellar. Yet, with such a steep climb, even a small misstep could trigger a sharp pullback. For risk-tolerant investors, PLTR stock might still offer allure. For others, waiting on the sidelines for a better entry point could be the smarter move. Is Palantir the future of AI or a bubble waiting to burst? Either way, PLTR stock is impossible to ignore. Read Next: 'It Is Dangerous': Palantir Chief Alex Karp, Elon Musk Sound Alarm On AI -- Is Anyone Listening? Photo: Shutterstock Market News and Data brought to you by Benzinga APIs

Will Palantir Technologies' Move to the Nasdaq Help the Stock Climb Even Higher? | The Motley Fool

Could this become yet another catalyst that pushes this high-powered artificial intelligence (AI) stock even higher? At first glance, Palantir's move from the New York Stock Exchange to Nasdaq may not seem like a big move since many top growth stocks are on both exchanges. But what has investors excited is the potential for it to be added to the Nasdaq 100 index, which contains the largest nonfinancial stocks on the exchange. And with many stocks on the Nasdaq 100 trading with market caps of less than $100 billion, it should be a slam dunk for Palantir, which is worth more than $145 billion, to make it onto the index. That's significant because if it's in the index, it will mean the stock is included in more exchange-traded funds and portfolios. All that buying could inevitably send the stock's value even higher. The addition to the index will also be a great sign of the data analytics company's mammoth success over the years, and validation of its efforts and strong growth. As a top technology and AI stock, Palantir could also become more popular with anyone who may not be that familiar with its business. It's hard to imagine many investors not being aware of one of the hottest growth stocks on the markets this year, but being on a highly recognizable index can attract even more attention to Palantir. While more investors may notice Palantir, what many of them will also pay close attention to is the stock's extremely high valuation. With such a massive market cap, the stock is trading at 58 times the revenue it has generated over the past 12 months and more than 320 times the profit it posted. There's no valuation multiple that stands out with Palantir that can help justify its current price tag. Many investors appear to be willing to buy it solely for the expectation that it will go higher, just because it is a hot AI stock. It's a speculative reason and perhaps one of the best examples of the Greater Fool Theory in effect right now. But attention can be both positive and negative. And as Palantir crosses more investors' radars and they notice its high valuation, their only move isn't necessarily to buy the stock. They could short it as well -- and short interest in Palantir has been picking up of late. Short interest has been coming down in recent years as the company has turned a profit and accelerated its growth. But now, with its valuation spiking to egregious levels, short-selling has been rising again, and it wouldn't be surprising to see more investors bet against Palantir in the near future. And by adding such a highly priced stock into the Nasdaq 100, the index becomes more expensive, which could turn some investors away. So don't assume that by gaining more visibility, Palantir will generate surefire gains for those who buy it today. Although the company looks to be proving every doubter wrong these days with its soaring share price, the danger is that anyone buying the stock without regard for its fundamentals could be left holding a very expensive bag. Palantir's business is doing well; there's no question about that. But when put into context with its earnings and revenue numbers, the valuation just doesn't make any sense at this point. And when that happens, you're in risky territory because all it may take is for one domino to fall -- whether it's in the tech sector or the AI world, or an underwhelming earnings report from the company -- and shares of this highly valued stock could quickly come crashing down.

Palantir Stock vs. Nvidia Stock: Billionaires Are Buying One and Selling the Other

Palantir and Nvidia have emerged as two of the hottest names fueling the AI movement. So far in 2024, the S&P 500 index has gained an impressive 26% while the tech-heavy Nasdaq Composite has soared roughly 28%. Without a doubt, one of the biggest tailwinds fueling these market returns is artificial intelligence (AI). Among AI's hottest stocks through 2024 are data analytics company Palantir Technologies (PLTR -1.03%) and semiconductor leader Nvidia (NVDA 0.28%). Both companies have handily topped the markets this year -- with shares of Palantir rocketing by 291% while Nvidia has gained about 179% (as of market close Nov. 29). With Palantir and Nvidia looking like two of the AI realm's most dominant forces, would you be surprised to learn that some of Wall Street's brightest minds are only buying one of these stocks right now? Below, I'll outline moves made by some of the most prestigious hedge funds and detail why I think these decisions could make a lot of sense. How is Wall Street investing in Palantir and Nvidia? Thanks to an incredibly helpful tool called the form 13F, everyday investors can get a glimpse into what stocks large institutional investors are buying and selling. Below, I've quantified the buys and sells between Palantir and Nvidia stock among two notable hedge fund managers during the third quarter: Let's dig into what may have influenced the decisions to trim Palantir while adding Nvidia over the last few months. Why sell Palantir right now? In April 2023, Palantir launched its fourth major software suite -- the Palantir Artificial Intelligence Platform (AIP). The advent of AIP has catapulted Palantir into the forefront of the AI narrative, helping the company accelerate revenue across both the commercial and public sectors, all while achieving notable margin expansion and consistent profitability. While Palantir's current rate of growth and future outlook are impressive, there is one obvious reason to sell the stock right now: valuation. PLTR PS Ratio data by YCharts As of the time of this writing, Palantir is trading at a price-to-sales (P/S) ratio of 61. As the chart above illustrates, the company has experienced notable valuation expansion throughout 2024 and has emerged as one of the priciest software-as-a-service (SaaS) stocks among its peers. To put it plainly, there is a really good argument to be made that Palantir stock is overbought. Given how much momentum shares have witnessed in such short order, I can't blame the teams at Citadel and D.E. Shaw for reducing their exposure. The stock has had a historic run, and now appears to be a logical opportunity to lock in some profits. Why buy Nvidia right now? Nvidia is one of the most important pillars supporting the entire AI ecosystem right now. The company's chip sets, known as graphics processing units (GPUs), are perhaps the most coveted piece of infrastructure for generative AI development. In my eyes, the two most obvious catalysts fueling Nvidia's bull case thesis over the next few years are rising investment in AI-related infrastructure combined with the upcoming launch of the company's next generation GPU architecture, Blackwell. Similar to why I think investors are selling Palantir, the primary reason influencing the decisions to buy Nvidia could be valuation. NVDA PE Ratio data by YCharts While Nvidia's valuation isn't cheap per se, the company's current price-to-earnings (P/E) and price-to-free-cash-flow (P/FCF) multiples are trading relatively in line with 10-year averages. Given Nvidia is a much larger entity today than it was a decade ago, coupled with its strong position to continue acquiring incremental market share as demand for AI infrastructure continues to soar, investors could argue that Nvidia is actually undervalued -- making it a particularly compelling buy and hold at the moment. The bottom line While I understand the decision to sell Palantir and buy Nvidia right now, I can't say for certain what drove the decisions of the portfolio managers that I mentioned in this piece. As I've written in many other articles, I think competition in the GPU space is going to eat into Nvidia's growth sooner rather than later. For that reason, I haven't entirely bought into the notion that Nvidia's valuation is actually all that reasonable. While I own shares in both Palantir and Nvidia, I won't be adding to either position at their respective prices.

Meet the New S&P 500 Company That Just Reported Its Most Profitable Quarter Ever and Is Heading for a 280% Gain This Year

The S&P 500 is a powerful representation of today's market, including the 500 companies that fuel the economy. In order to make it into this benchmark, most of a company's shares must be available for trading, market cap should be $18 billion or more, and the company must be profitable. So, to be invited into the index is a pretty big deal. Inclusion also could result in gains for a particular stock over time as funds that track the index add it -- and as more cautious investors see this milestone as a sign of strength and decide to give the stock a try. Just recently, a high-flying tech stock joined the S&P 500. This player, generating enormous growth thanks to its artificial intelligence (AI) powered platform, is heading for a gain of more than 280% this year. Can it keep up the momentum? Let's take a closer look at this company, its path so far, and what may lie ahead. Soaring past analysts' price targets Meet this new S&P 500 company that's soared well past analysts' expectations: It's Palantir Technologies (PLTR -1.03%). The average analyst has a 12-month price target of about $40 for Palantir, but the stock has climbed to about $66, just under the highest analyst price target of $75. This is thanks to Palantir's quarter after quarter of revenue growth and its reports of enormous demand for its Artificial Intelligence Platform (AIP). The Palantir story began about 20 years ago, and throughout most of the company's history, it was known for its contracts with governments. Palantir is a software-as-a-service company, helping customers aggregate all of their data and use it to make key decisions or launch new and potentially game-changing programs. Now, fast-forward to recent times and the AI boom. Companies are eager to harness the power of AI to improve their operations, save time and money, and launch new projects. And more and more, they're turning to Palantir's AIP. Palantir launched the platform last year and demand has soared -- on top of this, since companies love AIP, commercial revenue is becoming a huge growth driver for Palantir. In the most recent quarter, for example, U.S. commercial revenue climbed 54%, while U.S. government revenue increased 40%, and in the previous quarter commercial revenue growth topped government growth too. This trend is fantastic because it shows Palantir has a new and high-potential growth driver -- the commercial customer -- but at the same time government customers continue to deliver double-digit growth. So Palantir has the best of both worlds. Commercial customer growth A look at commercial customer count shows us how meteoric gains have been for Palantir. Just four years ago, the company had only 14 U.S. commercial customers, and today it has almost 300. The size of deals has become significant too, with the company closing 104 worth more than $1 million in the recent quarter. Part of this momentum may have to do with Palantir's excellent way of introducing AIP to potential customers. The company holds AIP Bootcamps, sessions that help this potential customer go from zero to a use case in a matter of hours. These bootcamps have been highly successful, generally resulting in major deals in the weeks following the event. For example, in the latest quarter, three commercial customers signed seven-figure deals less than two months after their bootcamps. All of this helped Palantir recently report its biggest quarterly profit ever, with net income climbing to $144 million. What's ahead for Palantir? So, what's ahead for this top tech company? Considering AIP launched just last year and we're still in the early stages of the AI boom, a lot more growth may be ahead for Palantir -- especially in the commercial business. Analysts forecast more than 25% annual growth in earnings per share over the coming five years, and the company's comments about demand support the idea of ongoing strong revenue growth. Chief executive officer Alex Karp spoke of "unwavering demand" in his latest letter to shareholders. Palantir shares aren't cheap right now, trading at more than 170 times forward earnings estimates, but this may not hold back the stock from additional gains. Often, technology stocks in their early days of growth come with high valuations, but if earnings growth takes off over time, those valuations could come down. All of this means that Palantir's momentum might continue, and investors who buy today -- or who already have invested -- and hold onto the stock could have a lot to gain over the long run.

Wall Street Analysts Are Torn on Palantir's Earnings in 2025: 1 Sees Minimal Upside While Another Thinks Earnings Could Double | The Motley Fool

The artificial intelligence (AI) analytics company Palantir Technologies (PLTR 0.47%) enjoyed quite the run in the market, surging this year partly due to the AI trade. Palantir's stock is up nearly 285% this year. Given the run and the valuation, some analysts are starting to push back, with the average Wall Street analyst price target implying roughly 48% downside, according to TipRanks. However, some analysts still think the stock can march higher. One point of contention between analysts could be earnings projections in 2025. They seem torn, with some projecting minimal upside while others think they could double. Earnings can get lost in a frothy market categorized by high valuations. However, earnings are crucial to a stock's price because they show a company's profits or losses. Analysts frequently rely on the price-to-earnings (P/E) ratio to value a stock, which looks at a company's market capitalization compared to its earnings. Another way to look at it is by comparing a company's stock price to its earnings per share (EPS). For example, if a company has a $20 stock price and earned $2 in earnings per share over the last 12 months, it has a P/E of 10. Analysts use the P/E ratio to determine if stocks are undervalued or overvalued, and each sector normally has different P/E levels that determine this. But the P/E is not everything, and there are many other ways to value a stock. Long-term investors looking five to 10 years down the road don't have to rely on the P/E as much because it will change frequently. A longer runway allows investors to focus less on near-term profits, especially if they believe fundamentals and the long-term outlook are intact. However, institutional money managers who invest on 12- to 18-month time horizons are laser-focused on earnings. You shouldn't invest like professional money managers, but you should still pay attention to this group because institutional inflows and outflows can move a stock materially. Investors can also glean a lot of information by looking at earnings projections. For instance, if the range of earnings projections varies greatly, analysts are likely less certain, and there could be more room for error and valuation adjustments. Meanwhile, a tighter range of earnings projections usually means there is a clearer consensus on a company's near-term outlook. Palantir's consensus diluted EPS estimate in 2025 is $0.31, which implies a 48% increase from the consensus estimate in 2024 of $0.21, according to Visible Alpha. (Fourth-quarter earnings of 2024 won't come out until January.) The low estimate for 2025 is $0.25, implying 19% upside. That wouldn't be bad for most companies, but when you trade as high as Palantir, I would consider that earnings growth to be minimal. The high estimate is $0.42, implying a doubling from 2024. The consensus consists of nine brokers' estimates. While I'm not certain who holds the low estimate, Argus Research downgraded the stock earlier this month, one of the only downgrades in the last two months, and after Palantir reported strong third-quarter earnings. The Argus analyst Joseph Bonner attributed part of his downgrade to a valuation call because the stock tripled and now trades at a huge valuation. Palantir would have to grow earnings very fast to maintain this valuation, he said during an interview with the Schwab Network. Bonner's other concerns focus on Palantir's potential market. The company's platform harnesses AI and machine learning to analyze real-world data and gain insights and trends that help businesses solve problems. The platform makes it easy for people without training in AI and machine learning to use and even visualize the data. Palantir does a lot of business with the government and wants to expand further in commercial sectors. However, Bonner questions how big this potential market is and how much competition the company could face. Meanwhile, Wedbush analyst Dan Ives recently issued a report reiterating his outperform rating and hiking his price target from $57 to $75. Ives believes software companies are about to join the "AI party," and he sees burgeoning uses for Palantir and further adoption of generative AI in 2025, which he views as a catalyst. I tend to take a more Bonner-like approach and avoid stocks trading at massive valuations like this. Ives' price target only implies about 15% upside from current levels. I am not an expert on generative AI and its future, so there may be a case for holding the stock for long-term investors, but I wouldn't be surprised to see a pullback at some point.

Palantir Stock vs. Nvidia Stock: Billionaires Buy One and Sell the Other | The Motley Fool

Palantir Technologies (PLTR 1.56%) shares have soared by 285% this year, while Nvidia (NVDA 2.15%) shares have advanced by 175%. Both companies play important roles in the burgeoning artificial intelligence (AI) economy, but several billionaire fund managers sold some of their Palantir stakes and bought more shares of Nvidia during the third quarter. Palantir provides data analytics software. Its core Gotham and Foundry platforms integrate information and machine learning (ML) models into an ontology -- a digital layer that defines the relationships between real-world objects. Using prebuilt and custom analytics tools, businesses can query the ontology layer to surface insights that improve decision-making. Palantir also has an artificial intelligence platform called AIP, which brings generative AI support to its core products, letting users engage with that software using natural language. For instance, procurement teams managing supply chains with Foundry can simply ask the platform to review problems and propose solutions as they arise. While many vendors sell AI and analytics tools, Palantir believes it is unique in its ability to operationalize AI. In other words, Palantir says its software lets clients move prototype use cases to production more effectively than other solutions. There may be a bit of posturing in that belief, but analysts have recognized Palantir as a leader in AI/ML platforms. Palantir reported excellent financial results in the third quarter, beating estimates on the top and bottom lines. Revenue increased 30% to $725 million, and non-GAAP net income surged 43% to $0.10 per diluted share. Management attributed its strong performance to momentum with AIP. "Our unchallenged ability to channel and guide the demand for integrating AI seamlessly with essential data, distribution, and decision-making structures is what truly sets us apart," CEO Alex Karp wrote in his letter to shareholders. That confidence is undoubtedly encouraging for Palantir shareholders, but the company's valuation has become a significant problem. Wall Street expects Palantir to grow its adjusted earnings at an annualized rate of 27% through 2025. That makes the current valuation of 188 times earnings look absurdly expensive. Those figures give it a price/earnings-to-growth (PEG) ratio of 7, and conventional wisdom says anything trading at a PEG above 2 is expensive. Prospective investors should avoid this stock for the time being, and current shareholders should consider trimming large positions. Dan Ives at Wedbush Securities says Nvidia is the "foundation of the AI revolution." The company designs the most coveted graphics processing units (GPUs) in the computing industry. Nvidia accounted for 98% of data center GPU shipments in the last two years, and it has about 80% market share in AI accelerator chips. That leadership is reinforced by CUDA, a robust ecosystem of software development tools. An article in The Wall Street Journal recently explained how CUDA contributed to the rise of Nvidia: "Year after year, Nvidia responded to the needs of software developers by pumping out specialized libraries of code, allowing a huge array of tasks to be performed on its GPUs at speeds that were impossible with conventional, general-purpose processors like those made by Intel and AMD," wrote that newspaper's Christopher Mims. Nvidia reported excellent financial results in the third quarter, beating estimates on the top and bottom lines. Revenue rose 94% to $35 billion, and non-GAAP net income jumped 103% to $0.81 per diluted share. Investors have good reason to think that momentum will continue. Nvidia is currently ramping up production of its next-generation Blackwell GPUs, and CFO Colette Kress recently told analysts, "Demand is staggering." Looking ahead, Wall Street expects Nvidia's adjusted earnings to increase at an annualized rate of 52% through its fiscal 2026, which ends in January 2026. That consensus makes the current valuation of 52 times adjusted earnings look quite reasonable. Those figures give a PEG ratio of 1, which makes Nvidia far cheaper than Palantir. Patient investors should be comfortable buying a position in this stock today.