Palantir's AI-Driven Surge: Potential Bust or Continued Growth in 2025?

This AI Stock Is Up 360% So Far in 2024. Here Is Why It Could Be a Bust in 2025. | The Motley Fool

Has any S&P 500 stock had a better year this year than Palantir Technologies (PLTR -3.72%)? The stock is up a staggering 360% since the beginning of 2024 as I write this, producing outsize investment returns for virtually any portfolio it touches. I don't want to be a pessimist, but it could be time to share a cautionary tale about stocks that behave like this. Palantir has legitimate growth tailwinds in artificial intelligence (AI), specifically its AIP platform for deploying AI applications in the government and private sectors. However, its fundamentals haven't kept up with the stock price. History doesn't always repeat itself, but you can learn from it. Microsoft (MSFT -1.73%) one of today's largest and most influential companies, experienced a similar situation over 20 years ago. Below, I'll explain what happened to the stock back then and why Palantir's similarities to Microsoft make it arguably the largest potential bust of 2025. You may have heard AI being called the most important technology since the internet's arrival in the late 1990s. That could be true. Yet the stock market tends to get ahead of itself. Excitement for the internet in the late 1990s fueled a stock market bubble that ultimately popped in early 2000. Microsoft became one of Wall Street's hottest stocks in the mid-1990s due to its successful Windows computer operating system software. The stock enjoyed a massive run that inflated its valuation to astronomical levels. At its peak, Microsoft stock traded at a price-to-sales (P/S) ratio over 31: It can be hard to appreciate valuations when they're just numbers on a chart. To be clear, paying 31 times a company's total revenue for its stock is expensive. Mathematically, an investor buying stock at that valuation waits 31 years for the company (not including revenue growth) to repay their investment with sales dollars. That's not profits, by the way -- it's sales! That's a terrible return on your investment; you're waiting many years to make your money back, even if the business is rapidly growing. Unfortunately, investors don't think about it in these terms when emotions like greed and euphoria run rampant. As you know, Microsoft grew back in the 1990s and became arguably the world's largest and most prominent technology company. But how did buying at the stock's peak valuation turn out? The stock collapsed due to its unrealistic valuation and took approximately 18 years to reach new highs. Again, Microsoft's business kept growing; its revenue increased by over 330% during those 18 years. It's hard not to see some similarities between Microsoft back then and Palantir today. Palantir's Artificial Intelligence Platform (AIP) has become arguably the leading software platform for deploying AI applications. However, similar to Microsoft years ago, the market's excitement has pushed the stock to unrealistic heights. Astonishingly, Palantir's P/S ratio has gone parabolic, rising to more than double Microsoft's peak in the late 1990s: Palantir will generate approximately $2.8 billion in revenue this year, and its market cap has reached $187 billion. This is worse (almost twice as expensive) than when zero-percent interest rates fueled a stock market bubble just a few years ago. Ultimately, nobody can time the market. Stock prices can do funny things for longer than you'd think. But the music will stop. It always does when valuations go parabolic. When the time comes, it's probably going to hurt. Investors buying into the parabolic upward momentum over these past couple of months could experience a long stretch of poor returns as the stock's valuation unwinds -- even as the business grows, much like Microsoft investors did. Given Palantir's nearly 400% returns in 2024, these circumstances make it a prime candidate to be the ultimate bust of 2025.

Prediction: Palantir Stock Could Hit $100 By Year-End (but There's a Catch) | The Motley Fool

Artificial intelligence (AI) once again dominated investment themes during 2024. While 2023 was all about the "Magnificent Seven" stocks such as Nvidia, Microsoft, Apple, Amazon, Alphabet, Tesla, and Meta Platforms, 2024 was influenced even more by a few new players that are vying for equal status as big tech names. In my eyes, no other upstart tech company has garnered anywhere near the attention that enterprise software platform Palantir Technologies (PLTR -0.29%) is getting this year. As of this writing, Palantir stock has gained 380% so far in 2024 -- making it the highest-performing stock in the S&P 500 by far. Right now, shares of Palantir trade around $82. Below, I'm going to break down Palantir's meteoric rise and explain how the stock could very well continue climbing higher, perhaps even hitting $100 a share by the end of the year. But more important than the short-term potential of this stock, I'll outline if now is the best time to invest in Palantir for the long term. I'll admit that Palantir has earned its moment in the spotlight. Just this year alone, the company struck a number of strategic partnerships with technology's most influential players -- including Microsoft, Oracle, Amazon, Meta, and defense consulting firm Booz Allen Hamilton. On top of that, the company earned inclusion into the S&P 500 and Nasdaq-100 indexes, an enviable milestone for any company. The launch of Palantir's Artificial Intelligence Platform (AIP) software suite in April 2023 has been directly correlated with steadily accelerating revenue across both the private and public sectors, augmented by widening profit margins and a transition to consistently positive net income. All told, 2024 was a milestone year for Palantir on several fronts -- and as an investor myself, I'm incredibly pleased. Nevertheless, while I am bullish on the company's long-term potential in the AI landscape, investors need to take a hard look at valuation metrics before doubling down on the stock. The chart below illustrates Palantir's share price over the course of 2024. What's incredible is that for much of the year, shares held quite steady following a slight jump between January and February. It really wasn't until the summer that Palantir stock started showing consistent increases. Furthermore, the stock really kicked into a new gear in early November -- following an impressive third-quarter earnings report. While I do think Palantir stock deserves a premium over other AI software stocks, the valuation multiples below illustrate how out of hand things have become from an investment perspective. Data source: Yahoo Finance. Simply put, paying 170 times forward earnings for a company growing by 30% is disconnected from reality. Furthermore, a PEG ratio over 1 generally indicates that a stock is overvalued and that its price (market cap) is accelerating much faster than the expected growth in earnings per share over the next several years. Palantir's PEG ratio is higher than 3, indicating a high degree of valuation expansion at the moment. While I tend to think of Jim Cramer as more of an entertainer, I have to admit that I agree with his analysis here. Could Palantir reach $100 per share by the end of the year? Maybe. But as Cramer subtly implies, there are clearly a lot of eager retail investors and meme investors fueling the hype in Palantir right now. Shares have risen at an unprecedented pace -- almost mimicking that of Nvidia over the last two years. At the moment, I see Palantir as more of a momentum investment fueled by day traders. Although I do think the stock could make a move to $100 sooner than later, I also think it could sell off materially shortly thereafter -- leaving many unsuspecting investors holding the bag at the worst possible time. As a long-term investor, I'll be on the lookout for more reasonable prices that align with the fundamentals of Palantir's business.

Will This Artificial Intelligence (AI) Stock Continue Its Meteoric Rise in 2025? | The Motley Fool

That may lead to questions of whether that can continue in 2025. Ultimately, one cannot predict what will happen to Palantir over the next year. Still, looking at the state of the business and its financials could offer insight into whether they should expect the bull run to continue, or whether they should sell the stock and lock in gains. The current catalyst for Palantir stock hinges on AI-driven productivity gains. Indeed, investors should first understand Palantir's platforms have long depended on AI. Both Gotham and Foundry have applied this technology since well before investors had any understanding of it. However, it reached a new level upon releasing its generative AI-driven Artificial Intelligence Platform (AIP) in 2023. Palantir introduced this technology to clients through AIP boot camps soon after, yielding massive productivity gains for its users. On the Q3 2024 earnings call, Palantir highlighted how an equipment rental company increased its average revenue retention (ARR) 12-fold. The gains highlighted by the product led customers from a variety of industries to sign seven-figure deals with Palantir. On the government side of the business, it reported its strongest sequential growth in 15 quarters. It credited TITAN, the Army's next-generation intelligence ground station, for much of this growth. The company also mentioned the benefits of its Maven Smart System, which took what was a 2,000-person targeting cell and matched its performance with just 20 people. Nonetheless, the main question for investors is how that translates into financial gains for Palantir. One has to wonder whether the exuberance is overly positive. Indeed, quarterly revenue growth has improved to 30% year over year. In comparison, its revenue of $2 billion for the first nine months of 2024 grew by 26% yearly. During that time, the company's operating expenses grew by only 9%. That allowed its net income attributable to stockholders in the first three quarters of the year to rise to $383 million, increasing 229% compared to the same period in 2023. With an improved performance, Palantir raised revenue guidance for 2024 to just over $2.8 billion, up from the $2.75 billion range in the previous quarter. If that forecast holds, the revenue growth rate will hold at 26%. Unfortunately for potential investors, these gains are likely baked into its stock price -- and then some. This is not just because the stock is up by the aforementioned 12-fold gain in two years, or the approximate 300% rise over the last 12 months. Instead, this is more likely a valuation call. Its trailing P/E ratio is about 368, which may not be representative of the stock's value. Nonetheless, with the trailing price-to-sales (P/S) ratio of 67 and a forward sales multiple of 60, the stock shows clear signs of overvaluation. That sales multiple prices Palantir stock for perfection, indicating it could sell off at the first sign of less-than-ideal growth rates. Given Palantir's rise over the last 12 years, investors should not expect the increases to continue in 2025. Admittedly, anything is possible with a cutting-edge AI stock like Palantir, and investors often choose to ignore high valuations when they see growth potential. Nonetheless, investors take a tremendous risk when paying 60 times forward sales, no matter the long-term growth prospects. Such levels can lead those who are otherwise Palantir stock bulls to fear a significant retrenchment and sell, making buying the stock a highly risky prospect right now. Indeed, the productivity gains Palantir's software offers likely mean its growth story will not end here. However, with so much of its forecast growth already priced into the stock, investors should probably keep Palantir on a watch list rather than a buy list at this time.

Is Palantir Stock a Buy Before 2025? | The Motley Fool

With shares up by 41% since Nov. 5, Palantir Technologies (PLTR 8.54%) straddles two massive stock market hype cycles: generative AI and the Trump presidency. Let's explore how these potential opportunities could play out for the data analytics company in 2025 and beyond. While AI surged into the mainstream with the launch of OpenAI's ChatGPT in late 2022, Palantir has been working on a somewhat related technology, big data analytics, since its founding in 2003. This field involves processing vast amounts of information to uncover trends, patterns, and other actionable insights. It can help organizations detect fraud, optimize workflows, or detect potential threats. Big data analytics can be considered a precursor to large language models (LLMs) like ChatGPT. And Palantir quickly added generative AI capabilities to its legacy platforms to help them work faster and deliver real-time insights. These features are particularly useful for military and law enforcement clients, where Palantir's software can help operators identify and get information about real-time threats during missions. Palantir is already using AI to assist the Ukrainian armed forces with military targeting during its war with Russia. And in June, the company partnered with Israel to work on combat-related technology. Palantir's high-stakes business model makes it easy to hype it. However, Donald Trump's victory seems to have sent things into hyperdrive. Judging by the stock's 41% rally since Nov. 5, many investors see the new administration as a potential growth catalyst. In the third quarter, Palantir earned $320 million (around 44% of all sales) from U.S. government clients, including the Department of Defense and the Department of Homeland Security. During the previous Trump administration, Palantir played an important role in immigration policy, assisting Immigration and Customs Enforcement (ICE) with deportations. The new administration plans to ramp up these efforts, with Trump himself promising the largest deportation in U.S. history. That said, it remains unclear how much Trump's agenda will actually benefit Palantir, which works with ICE through a software-as-a-service (SaaS) contract called Falcon. According to the news website Business Insider, the company only earned $127 million from the contract between 2013 and 2022, coming out to roughly $14 million per year. That's a drop in the bucket for a company guiding for sales of around $2.8 billion this year. Business Insider also reports that ICE is working on replacing Falcon with a custom-built tool called RAVEn, which will mine publicly available data, unlike Falcon, which works with data already in the agency's possession. And while previous Republican presidents have generally pursued a hawkish foreign policy, Trump signaled that he would like to see the conflicts in Ukraine and the Middle East wind down. Palantir investors probably shouldn't bet on a surge in military spending in 2025. Third-quarter revenue grew 30% year over year to $726 million, while adjusted earnings before interest, taxes, depreciation, and amortization jumped 39% to $283.6 million (this figure adds back $142.4 million in stock-based compensation). While these results are decent, they are not outstanding -- and certainly not good enough to justify the stock's forward price-to-earnings ratio of 158. For context, the S&P 500 has an average forward PE estimate of 24, while AI industry leader Nvidia trades for just 30 times expected earnings despite growing its top line by 94% in its most recent quarter. Palantir's valuation is out of touch with its fundamentals. And Trump's presidency probably won't juice the company's growth potential as much as the market seems to believe. Investors should expect its shares to come back down to earth in 2025.

Is Palantir the Top Artificial Intelligence (AI) Stock for 2025? | The Motley Fool

Palantir (PLTR 8.54%) has quickly emerged as a top artificial intelligence (AI) stock pick for many investors. The stock has more than quadrupled in 2024 and has a huge following. But with all that success comes an obvious question: Is Palantir still a top AI pick for 2025? I think the business is primed to succeed in the coming year, but there are also some high expectations baked into the stock price. Palantir makes AI software for its clients that provides the most up-to-date information possible to those with decision-making capabilities. This originally saw use in the government sector but has since expanded to the private sector. One of Palantir's most promising products is its Artificial Intelligence Platform (AIP), which allows companies to integrate generative AI models into their workflows rather than using a third-party tool on the side. This is a huge step toward AI becoming more integrated at work, and it has the potential to make employees far more efficient and make fewer mistakes. AIP demand has caused Palantir's growth rates to soar, with revenue rising 30% year over year to $726 million in Q3. However, its strongest segment by far was the U.S. commercial business, which saw revenue rise 54% to $179 million. Furthermore, the U.S. commercial customer count only sits at 321, so there's clearly a lot of room for growth. If Palantir can capture far more U.S. commercial customers and spread that growth to the government and international clients, Palantir's stock could just be getting started on a huge run. At least, that's the bull case for the stock. However, there are some important caveats here that need to be addressed. There's a reason why Palantir's U.S. client list is relatively small: Its software is very expensive. If we multiply the U.S. Q3 revenue by four (to get an annual rate) and then divide that figure by its customer count, we get revenue per client. In Q3, that figure was $2.23 million. Now, that's the average cost per customer, but it seems reasonable to deduce that if you're using Palantir, you're spending a minimum of $1 million annually with the company. That's a price tag that not many companies can afford, so Palantir's potential customer base is capped. Furthermore, companies with this kind of budget likely have access to significant technological resources and can build some of Palantir's offerings in-house. So, if you think tens of thousands of businesses will be signing up for Palantir's software over the next decade, you need to rethink your analysis. The problem is that Palantir trades like those customers who have already signed up. Right now, Palantir's stock trades for an astounding 65 times sales and 358 times earnings! So, what kind of growth would Palantir have to put up to reach Nvidia's current valuation? Much more than it's showing now. Let's say Palantir can achieve these two things: If it did that, it would take over four years for the stock price to rise to the same price valuation as Nvidia (excluding stock-based compensation effects). That's four years of the stock not changing in price, and increasing and sustaining its growth rate from current levels. These assumptions don't add up, especially with the limiting factor of Palantir's product price. As a result, I think investors should look for a new AI stock for 2025, as there are far more attractive options out there that don't have ludicrous expectations baked into them.

Is the Newest Member of the Nasdaq-100 -- a 764% Gainer Since Its IPO -- a Buy Going Into 2025? | The Motley Fool

Palantir was just added to the Nasdaq-100 and shares have been rocketing on the news. Outside of megacap technology companies, I'd argue that data analytics specialist Palantir Technologies (PLTR 2.09%) is the hottest name in the artificial intelligence (AI) realm. Palantir marked a lot of milestones this year -- most recently the company's entrance into the Nasdaq-100 index. While Palantir's early days as a public company were pretty rocky, the company has really come into its own over the last two years. Of course, Palantir can credit its current growth trajectory to unprecedented demand for AI. But with shares gaining 764% since its initial public offering (IPO), is now a smart time to invest in Palantir? Below, I'm going to break down Palantir's foray into the AI landscape and take a close look at the company's tailwinds. Moreover, I'll detail a thorough valuation analysis to help you determine if buying Palantir stock is right for you. In April 2023, Palantir launched its fourth software suite, called the Artificial Intelligence Platform (AIP). AIP has been nothing short of a smash for Palantir, helping the company quickly penetrate the private sector and win business over legacy enterprise software incumbents. Palantir's revenue diversification (away from its almost exclusively public sector base up until two years ago) resulted in better margins, consistent profitability, and excess cash flow. Furthermore, throughout much of 2024 Palantir has partnered with several names in big tech including Microsoft, Oracle, Meta Platforms, and Amazon. The primary focus of many of these partnerships is to marry their respective cloud computing infrastructures with AIP, specifically in classified environments with the U.S. military and adjacent defense operations. In other words, while Palantir continues to make headway in its commercial segment, the company has quietly found new avenues to reaccelerate growth in its legacy government business. Palantir's success in the AI landscape has led to a flurry of buying activity in the stock from a combination of retail investors and notable institutional funds. While this all appears like a recipe that makes Palantir a no-brainer investment, the company's run may be becoming disconnected with reality when it comes to valuation. Valuing Palantir is pretty challenging. In the graph below, I've benchmarked the company against a cohort of other enterprise software companies using the price-to-sales (P/S) ratio. At a P/S of 73, Palantir is approximately 3 times more expensive than the next closest comparable stock in this cohort. However, I personally don't see the P/S ratio as all that useful. To me, profitability is a more important measure of a company's growth as it illustrates the ability to reinvest into the business and fund future projects. While Palantir does generate positive net income and free cash flow, the company's profitability profile is nowhere near mature. To add some context here, Palantir currently trades at a price-to-earnings (P/E) multiple of 403, and a forward price-to-earnings ratio of 167. In either case, it's simply not appropriate to measure Palantir using traditional earnings-based valuation methodologies. PLTR PS Ratio data by YCharts. One final line of defense is to look at the PEG ratio. The PEG ratio can be useful because it accounts for earnings growth over the course of several years. A general rule of thumb is that a PEG ratio above 1 signals the stock could be overvalued. Right now, Palantir's PEG ratio is 3.5. By all accounts, Palantir is an expensive stock to own at its current valuation. Moreover, the stock's current valuation expansion (as seen above) isn't over, and the momentum doesn't appear to be slowing down. While Palantir stock is undoubtedly pricey, I don't see it as a stock to ignore. The company has done an impressive job diversifying its business by penetrating the private sector, while also identifying creative ways to reaccelerate its government business through the power of strategic partnerships with big tech and other defense contractors. I do see Palantir as a company that will remain a leader in the AI revolution, and so I think it's likely that even better days are ahead for investors. I think the best strategy regarding an investment in Palantir is to dollar-cost average over a long-term time horizon, as well as looking to bolster a position by taking advantage of sell-offs and valuation resets.

Should You Buy Palantir Stock After Its 370% Gain in 2024? Wall Street Has a Clear Answer for Investors | The Motley Fool

Shares of Palantir Technologies (PLTR 8.54%) have advanced 370% this year. Factors contributing to that upside include strong financial results driven by demand for its artificial intelligence platform, as well as the company's inclusion in the S&P 500 and Nasdaq-100. But investors should think twice before buying shares. Wall Street sees Palantir as one of the most overvalued stocks on the market. The median 12-month target among the 22 analysts that follow Palantir is $41 per share, according to The Wall Street Journal. That implies 49% downside from the current share price of $80.50. Importantly, median refers to the middle value, meaning half the analysts following Palantir expect the stock to fall more than 49%. Even the highest 12-month target of $80 per share implies downside. That said, certain analysts -- like Dan Ives from Wedbush -- believe most pundits misunderstand Palantir. He believes it could be the next Oracle, a comparison that likens the company to a $500 billion software giant. Ives thinks Palantir could grow into that valuation over the next three to four years. So, not all Wall Street analysts are equally bearish, but even Ives sees downside in the stock in the next 12 months. Here are the pros and cons of buying stock in Palantir. Palantir sells data analytics software. Its Gotham and Foundry platforms let clients integrate information and machine learning models into an ontology, a digital map that defines the relationships between real-world objects. Ontology data can be queried with analytical applications that improve decision-making. For instance, a manufacturing company could consolidate and query data from machine sensors and inventory systems to monitor production and identify potential bottlenecks. Last year, Palantir launched its artificial intelligence (AI) platform, AIP, which adds support for large language models to Gotham and Foundry. AIP lets businesses apply generative AI to their operations. For instance, the manufacturing company could prompt the platform in natural language to identify the root cause of quality issues by tracing defective products back to specific raw materials and machines. Palantir says its ontology-centric architecture differentiates its platforms from other analytics software, and AIP has been an unmitigated success. Forrester Research earlier this year ranked the company as a leader in artificial intelligence and machine learning software, awarding AIP higher scores than similar products from Microsoft and Alphabet. "Palantir is quietly becoming one of the largest players in this market," analysts commented. That bodes well for the company and its shareholders. AI platform spending is projected to increase at 51% annually through 2028. Indeed, Andrea Minonne at the International Data Corp. says, "AI platforms will be the fastest growing technology in the years to come." That means Palantir should have a powerful tailwind behind its business in the next few years. Palantir delivered an encouraging financial performance in the third quarter. Its customer count increased 39% to 629, and the average existing customer spent 18% more. In turn, revenue jumped 30% to $726 million, the fifth straight sequential acceleration. Meanwhile, non-GAAP earnings soared 42% to $0.10 per diluted share. Management attributed the strong numbers to incredible demand for AIP. "We absolutely eviscerated this quarter, driven by unrelenting demand for AI that won't slow down," CEO Alex Karp said in characteristically colorful language. "The world will be divided between the AI haves and have-nots. At Palantir, we plan to power the winners." Palantir has made a few important announcements since the quarter ended. It won a $37 million contract with the U.S. Special Operations Command, and it was awarded FedRAMP High Authorization, meaning its entire product portfolio can be used for sensitive unclassified workloads by the U.S. government. That could lead to more government deals in the future. Palantir has a valuation problem that investors cannot afford to ignore. The stock trades at 230 times adjusted earnings, an unjustifiable premium to virtually every software company. That valuation is particularly absurd because Palantir's earnings are expected to increase 31% over the next 12 months. Those numbers give the company a price-to-earnings-to-growth (PEG) ratio of 7.4. For context, using the same methodology, Nvidia has a PEG ratio of 1, Meta Platforms has a PEG ratio of 1.8, and Amazon has a PEG ratio of 1.9. Even Tesla's outrageously high PEG ratio of 6 is relatively cheap compared to Palantir's price tag. It has been easy to ignore valuation so far because Palantir shares have done nothing but move higher. However, not even the best stock is worth buying at any price. Investors that buy shares of Palantir today are taking on unnecessary risk.

Palantir's $100 stock price target may be closer than you think

Palantir Technologies has gained nearly 380% in stock value throughout 2024, establishing itself as the top performer in the S&P 500. Several factors have contributed to this notable increase. Palantir's strategic partnerships with influential firms like Microsoft, Oracle, Amazon, and Meta have strengthened its market position and operational capabilities. Additionally, the launch of Palantir's Artificial Intelligence Platform in April 2023 has significantly enhanced its product offerings, driving revenue growth across both public and private sectors. The company is also recognized for its advanced capabilities in data analysis and artificial intelligence, which have become increasingly critical in various industries, including healthcare and finance. Can Palantir's Pentagon bid send its stock soaring? Palantir's stock currently trades around $82, with analysts speculating that it could reach $100 by the end of the year. However, the company faces high valuation concerns, as its forward price-to-earnings ratio is approximately 170, suggesting potential overvaluation given the growth rate. This significant rise comes despite recent fluctuations, with shares experiencing a drop of 0.4% on Thursday, bringing the trading price to $82.09. Palantir's share price has raised alarms among investors focused on valuation metrics, as it currently trades at 174.9 times 12-month forward earnings, more than triple the 58.27 it held at the end of 2023. According to Barron's, Analyst Dan Ives of Wedbush noted that increased spending on artificial intelligence in 2025 could benefit Palantir's robust software offerings, making it a key player among competitors. He suggested that Palantir may achieve a status similar to Oracle, given its expanding use cases and demand across enterprise environments. Despite Palantir's impressive stock performance, analysts caution investors about potential risks, including market volatility and ongoing regulatory challenges related to data privacy and security. They emphasize the need for the company to maintain stringent innovation and adaptation to stay competitive. The firm's software solutions are utilized across several sectors, notably in government and defense, healthcare, and finance. These tools aid in complex data analysis, enhancing operational efficiencies and decision-making processes.

Is Palantir Stock a Buy? | The Motley Fool

2024 has been the year of Palantir (PLTR 8.54%). The stock has climbed nearly 342% year to date as of this writing while also gaining admittance to both the S&P 500 and the Nasdaq-100 indexes. Here's the question on everyone's mind, though: Is the stock still a buy heading into 2025? When looking at Palantir, one of the first things that stands out is its valuation. The stock's momentum this year has led it to trade at a forward price-to-sales (P/S) ratio of nearly 50 times 2025 analyst estimates. If we take out its nearly $4.6 billion of net cash and use an enterprise-value-to-sales multiple (EV/S), it still trades at 45.5 times. Meanwhile, the company grew its revenue by just 30% year over year last quarter and forecast revenue growth of 27% at the high end of its guidance for Q4. By comparison, at the peak of software-as-a-service (SaaS) valuations, SaaS stocks traded at a nearly 20 EV/S multiple while growing revenue in the low- to mid-30% range. Palantir is currently trading at more than twice that valuation with slightly slower revenue growth. While its stock is expensive, Palantir does have several strong qualities. One thing that separates it from a typical SaaS company is that it is very efficient with its sales and marketing, which is what many SaaS companies use to help drive sales. Last quarter, Palantir's sales and marketing expenses rose by just $7.1 million, or 4%, while its revenue soared by nearly $100 million, or 30%. That's extremely efficient and should help eventually lead to very strong earnings. Meanwhile, the company is just starting to tap into what could be a massive opportunity with its artificial intelligence (AI) platform. The company had previously established itself as a vital data gathering and analytics vendor for the U.S. government, which has used its platform to help fight terrorism and track COVID-19 cases. However, with its new AI platform, it has started to rapidly expand into the commercial sector by being able to address a lot of different use cases across various industries. Meanwhile, the government has also started to embrace the use of AI as well. Palantir's early AI success can be seen in the growth of its U.S. commercial revenue, which jumped 54% last quarter to $179 million. Its U.S. commercial customer count, meanwhile, soared 77% year over year. However, its big opportunity is moving these new customers from prototype (proof-of-concept) work into production (real-life applications). While a lot of early AI focus has been on building out AI infrastructure and training AI models, Palantir's secret sauce in the AI race is in the application and workflow layers. The application layer helps with logic and functionality, while the workforce layer deals with the actions needed to complete tasks. The key to its AI platform is Palantir Ontology, which becomes the operational layer of an organization. This helps map out the digital assets that are integrated into its platform, such as datasets and models, and connects them to their real-world counterparts, such as products and customer orders. Through this and the rigorous testing and evaluation tools within its platform, Palantir says it can quickly move customers from proof-of-concept to AI software solutions that can help manage mission-critical tasks in real-world situations with full transparency and without the negative impact of AI hallucinations. AI hallucinations are when AI models start to come up with inaccurate and sometimes nonsensical outputs. This is one of the major current issues with AI, with estimates that AI chatbots can hallucinate between 3% to 27% of the time. As such, being able to manage and mitigate these hallucinations is vitally important as companies look to use AI technology in real-world applications. Much of Palantir's early commercial success has been with prototype work. So, as it moves these new customers to real-world AI software solutions, it has an opportunity to greatly accelerate revenue in the future. Palantir has a large potential opportunity in front of it. However, with the stock trading at a P/S multiple of nearly 50 times, a lot of future growth is already priced into the stock. Meanwhile, it will need to grow its revenue much quicker than 30% and over a sustained time to justify its current valuation. Analysts predict Palantir will grow its revenue by just over 24% next year. That seems low and easily beatable, but I think investors already expect a lot more revenue growth than the analyst consensus, given its current valuation. While I think the company has the opportunity to greatly accelerate its revenue growth, its valuation leaves little room for error. As such, I would not be a buyer at current levels and think investors could be wise to at least take some partial profits.

2 Stocks to Buy Hand Over Fist Before the Nasdaq Soars Higher in 2025 | The Motley Fool

Technology stocks have been in scintillating form on the market in the past couple of years, which is evident from the 86% gains clocked by the Nasdaq Composite index during this period, and the good news is that the impressive run in tech stocks could continue in 2025 as well. Historical trends show that the Nasdaq Composite has averaged gains of 17% in the year following a calendar year in which it logged 20%-plus gains. Meanwhile, the index has averaged an annual gain of 19% in a year following a year in which it clocked a 30% jump. It is worth noting that the Nasdaq Composite index is up just over 32% so far in 2024, as of this writing. Of course, past performance isn't a reliable indicator of what the future holds, but a closer look at the trends in the technology market indicates that the Nasdaq could indeed head higher in 2025. From strong economic growth in the U.S. to robust consumer spending to disruptive tech trends such as artificial intelligence (AI), there are multiple factors that could help tech stocks soar higher in the new year. That's why now would be a good time to take a closer look at two Nasdaq Composite components that have delivered outstanding gains in 2024 and could head higher in 2025 as well. Share prices of semiconductor bellwether Nvidia (NVDA 0.39%) are up 185% in 2024 as of this writing. The market has handsomely rewarded the chipmaker's healthy top- and bottom-line growth, which has been driven by the sizzling demand for its AI hardware. The impressive thing to note here is that Nvidia trades at an attractive 33 times forward earnings despite the stock's solid surge this year. That isn't very expensive when you consider that the tech-laden Nasdaq-100 index has a forward earnings multiple of 27, especially considering the pace at which Nvidia's bottom line has been growing. Consensus estimates compiled by Yahoo! Finance forecast a 128% increase in Nvidia's earnings per share in the current fiscal year to $2.95 per share. That's expected to be followed by a 50% jump in the next fiscal year (which will begin toward the end of January 2025 and will coincide with the majority of the calendar year) to $4.43 per share. However, as the following chart shows, analysts are more bullish about Nvidia's bottom-line growth and have significantly raised their earnings-per-share estimates for the next fiscal year over the past six months. It won't be surprising to see this trend continue in 2025. That's because Nvidia's new Blackwell processors will see a sharp production ramp-up next year. Morgan Stanley estimates that Nvidia could manufacture 250,000 to 300,000 units of its Blackwell chips in the fourth quarter of calendar 2024, generating between $5 billion and $10 billion in revenue. The production of the Blackwell chips is expected to jump to a range of 750,000 to 800,000 units in the first quarter of 2025, indicating that Nvidia's revenue from these chips could multiply. The production of the previous-generation Hopper processors is expected to drop from 1.5 million units in the current quarter to 1 million units in the first quarter of 2025. As Nvidia gears up the production of its Blackwell chips and winds down Hopper, it should ideally see a big jump in its top and bottom lines. That's because the company reportedly priced the Blackwell B200 processor at a premium of 60% to 70% when compared to the flagship Hopper chip, the H200. You might be wondering why Nvidia customers would be willing to pay such a premium for its latest chips, but the cost increment should be more than offset by the 4x performance gains that Blackwell is expected to deliver over Hopper. As such, there is a solid chance that Nvidia could continue to outperform the broader market in 2025. Assuming it does achieve $4.43 per share in earnings next year and trades at 41 times forward earnings (in line with its five-year average), its stock price could go to $182. That would be a 35% jump from current levels. I wouldn't be surprised to see this AI stock delivering stronger gains in the event of a bigger jump in its earnings as the market would likely reward Nvidia with a higher valuation. Palantir Technologies (PLTR 2.09%) has set the stock market on fire in 2024 with remarkable gains of nearly 390% as of this writing. This red-hot rally made Palantir stock quite expensive, which explains why only those investors with an appetite for risk and volatility should consider buying it right now. After all, Palantir stock is trading at an expensive 422 times trailing earnings. Of course, its forward earnings multiple of 222 points toward a big increase in its bottom line, but it is still extremely expensive. Despite this, growth investors might still want to consider buying this hot stock. Palantir is the leading player in the market for AI software platforms. Research and advisory company Forrester recently pointed out that Palantir is a leading provider of AI and machine learning (ML) software platforms, and it is "quietly becoming one of the largest players in this market" thanks to the rapidly growing adoption of the company's Artificial Intelligence Platform (AIP). So, Palantir seems on its way to making the most of a lucrative growth opportunity in the AI software platforms market, a space that's expected to generate $153 billion in revenue by growing at a compound annual rate of nearly 41%. The company's growing influence in this market is also evident from the acceleration in its growth in recent quarters. Palantir's growth could continue accelerating as both commercial and government customers have been quick to deploy its software platforms to integrate generative AI within their operations. The U.S. Army, for instance, recently extended its partnership with Palantir worth $400.7 million for a period of four years, which can be extended to a value of $619 million. This is just one instance of customers increasing their usage of Palantir's offerings. The company ended the third quarter of 2024 with a remaining deal value of $4.5 billion, which was a 22% increase over the year-ago quarter. This metric refers to the total value of contracts that Palantir has at the end of a quarter. Analysts are forecasting a 25% increase in the company's top line to $2.79 billion in 2025, so its remaining deal value points toward a solid revenue pipeline that should help it sustain its impressive growth in the future as well. Palantir's earnings are expected to jump by 52% this year to $0.38 per share. The good part is that Palantir's margin profile has been improving as it has been able to gain more business from existing customers, leading to strong unit economics. This combination of solid unit economics and the company's robust revenue pipeline are the reasons why Palantir's earnings-per-share estimates have been heading higher this year. This trend could continue in 2025 and beyond as the company is currently scratching the surface of a massive growth opportunity in the AI software platform space. As such, Palantir stock could continue heading higher in the new year, which is why growth-oriented investors may still want to buy it even after the outstanding gains it has delivered in 2024.

Palantir Stock vs. Oracle Stock: Wall Street Says Only 1 Will Head Higher in 2025 | The Motley Fool

Businesses and governments are generating more data than ever, and software companies like Palantir (PLTR 0.17%) and Oracle (ORCL -0.31%) can help them make the most of it. But effective data utilization today relies on a key ingredient -- artificial intelligence -- and both companies stand to gain from the increasing demand for AI services. Both companies have already seen the impact of the growth in AI spending on their stock prices. Palantir shares are up 369% this year as of this writing. Oracle shares are up a respectable 61% in 2024 so far. Despite the strong financial outlook for both companies, Wall Street analysts only expect one of these AI-driven companies to keep climbing higher in 2025. Here's what investors need to know. Palantir's software gives government and commercial clients the ability to glean usable insights and develop operating efficiencies from big data. The company initially built a customer base among government agencies, but it extended the framework to commercial-enterprise customers over time. Those commercial customers are growing quickly, up 51% year over year in the third quarter. Growth is particularly strong in the U.S., where it grew its customer count 77% and U.S. commercial revenue by 54%. Overall, revenue grew 30% last quarter. Palantir is also showing considerable operating leverage. Adjusted operating margin expanded to 38% from 29% in the third quarter last year. As Palantir scaled the business over the past year, it became GAAP profitable, gaining it a spot in the S&P 500 index. Palantir's core offerings are Gotham and Foundry, which serve government and commercial clients, respectively. But the release of its artificial intelligence platform, AIP, has been an accelerator for customer adoption over the last year-and-a-half, particularly in the U.S. CEO Alex Karp has focused more on product innovation than sales and marketing as a means to attract new customers, and the adoption of AIP is a clear indication of the strategy's success. With relatively low operational expenses and strong continued demand, Palantir should show great financial results over the next few years. The problem with the stock, however, is the price. Shares currently trade for an enterprise value-to-revenue multiple of 62. Even with strong sales growth expectations, the company's enterprise value is still 48 times analysts' revenue expectations for 2025. It also trades for over 150 times forward earnings estimates. Despite the strength of the business, it doesn't justify a price anywhere near that level. Oracle has a long history of providing leading database applications to help businesses store and use their data effectively. More recently, though, its cloud computing segment, specifically Oracle Cloud Infrastructure, or OCI, has been the driving force behind its results. Oracle is rapidly growing its compute capacity, and there's clear demand for it. OCI revenue increased 52% in the most recent quarter. That's an acceleration from each of the last two quarters. Meanwhile, its backlog increased 50% to a whopping $97 billion. That should enable the accelerating growth to continue. Management expects Oracle's total cloud services revenue to top $25 billion for fiscal 2025 (ending in May), up from $19.8 billion in 2024. Artificial intelligence spending is the main factor pushing Oracle's cloud revenue higher. GPU consumption was up 336% in the quarter. Oracle has signed several high-profile agreements with AI companies, including OpenAI and, most recently, Meta Platforms. Oracle will collaborate with Meta to develop new AI agents supporting industries ranging from healthcare to finance based on Meta's Llama model. That could drive further increases in OCI demand. With the rapid growth of OCI revenue, Oracle is finally seeing some relief from the pressure the buildout put on its financial results. Operating margin dropped precipitously from 2021 through mid-2023. But profitability has improved as OCI scales, resulting in an operating margin of 30% in the most recent quarter. That number should continue to climb back toward historic levels in the mid-30% range. Additionally, Oracle's rapid buildout of OCI puts it in a stronger position to retain enterprise customers for its database applications. It built its infrastructure with a focus on migrating enterprise applications to the cloud. As it increases the percentage of customers using its latest software, it should see strong retention there as well. Shares of Oracle trade for about 27.5 times forward earnings as of this writing. If the stock reached the analysts' median price target of $197 within a year, it would trade for approximately 32 times trailing earnings, or about 30 times analysts' current estimates for fiscal 2026. With AI spending supporting steady revenue growth and strong margin expansion, that would be a fair price to pay. As such, investors could realistically see the stock climb 24% over the next year, as the median price target suggests.

Palantir Touted As 'Next Oracle' By Dan Ives: Here Is Why The Wedbush Analyst Called The Company A 'Table Pounder' - Palantir Technologies (NASDAQ:PLTR)

Palantir Technologies Inc. PLTR could emerge as "the next Oracle" in the artificial intelligence revolution, according to Wedbush Securities analyst Dan Ives, who dubbed the data analytics firm "the Messi of AI" despite its stock already surging 395.42% in 2024. What Happened: The company's stock, trading at $82.14, has become the S&P 500's top performer this year, pushing its market capitalization to $183.23 billion. This remarkable run has positioned Palantir well above Wedbush's $75 price target, though Ives maintains strong conviction in the company's growth trajectory. "Looking ahead to the next 5-10 years, I believe it's all about Palantir. In the context of the AI revolution, this is just the beginning," Ives emphasized on CNBC's Closing Bell Overtime. He describes Palantir as a "table-pounder" stock that investors should consider adding to their portfolios, despite its current price-to-earnings ratio of 411.90. Former Palantir employee Alex Fishman, now with Empros Capital, provided additional insight into the company's potential: "When I look at Palantir, it's one of the few companies where I can easily envision it becoming 10 or 20 times its current size." Fishman highlighted Palantir's crucial role in defense and commercial sectors, describing it as "the glue that ties everything together" in coordinating critical technological efforts. See Also: Billionaire Investors Michael Burry, David Tepper Could Benefit From China's Stimulus Measures Why It Matters: Wall Street's broader consensus remains more conservative, with an average price target of $35.58 based on 20 analyst ratings. However, recent updates suggest growing optimism. UBS issued an $80 price target on December 19, while Mizuho and Baird released positive outlooks, though their average target of $64.67 still implies a potential downside. The company's technical indicators suggest room for continued growth, with an RSI reading of 62 indicating the stock isn't yet in overbought territory despite its dramatic rise. The stock's 52-week range of $15.66 to $84.80 reflects its volatile but upward trajectory. In the same discussion, Ives also raised Apple Inc.'s AAPL price target to $325, citing AI initiatives, though he emphasized Palantir's unique position in the enterprise AI space. As companies increasingly adopt AI solutions, Ives believes Palantir's commercial expansion and defense sector dominance position it for continued growth into 2025. Read Next: Cathie Wood Takes Profit On Hot AI Stock Palantir Again, Continues To Sell Block Shares Amid Bitcoin Buzz Image Via Pixabay Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors. PLTRPalantir Technologies Inc$81.82-0.68%Overview Rating:Speculative37.5%Technicals Analysis660100Financials Analysis200100WatchlistOverviewAAPLApple Inc$259.060.33%Market News and Data brought to you by Benzinga APIs

2 Popular AI Stocks to Sell Before They Fall 49% and 62% in 2025, According to Certain Wall Street Analysts | The Motley Fool

Shares of Tesla (TSLA -3.46%) have surged 75% since the presidential election. But most Wall Street analysts now believe the stock is overvalued. The median 12-month target of $275 per share implies 38% downside from the current share price of $440. Joseph Spak at UBS is especially skeptical. He increased his price target to $226 per share in November, but kept his sell rating. He thinks the market is giving Tesla too much credit for its artificial intelligence (AI) ambitions. His outlook implies 49% downside. Shares of Palantir Technologies (PLTR 8.54%) have more than quadrupled this year due to a series of strong financial results. But most Wall Street analysts now view the stock as overpriced. The median 12-month target of $39 per share implies 47% downside from the current share price of $74. Brent Thill at Jefferies is particularly bearish. He reiterated his price target of $28 per share in November and kept a sell rating on the stock. Thill sees valuation as a serious problem for Palantir. His outlook implies 62% downside. Here's what investors should know about Tesla and Palantir. Tesla reported encouraging third-quarter financial results. Revenue increased 8% to $25.1 billion on strong sales growth in the energy generation and storage segment, as well as the services segment (supercharging, insurance). Gross margin expanded 195 basis points due in part to an increase in full self-driving (FSD) sales, and non-GAAP (adjusted) earnings climbed 9% to $0.72 per diluted share. Admittedly, revenue and earnings growth were far from spectacular, but gross profit margin hit 19.8% in the quarter, the highest level since 2022. That was encouraging because Tesla has been caught in a cycle where rising interest rates weakened demand, creating a need for price cuts that hurt profits. In fact, earnings had fallen in the previous four quarters. But interest rates are dropping and margins are expanding, which hints at better days ahead. Additionally, CEO Elon Musk on the earnings call reiterated certain comments he made at the Cybercab event in October. Tesla plans to release an unsupervised version of its FSD software and open a ride-hailing service to the public in California and Texas next year. That would increase its addressable market. Spending on autonomous ride-hailing could hit $5 trillion by 2030, according to Statista. However, Wall Street expects Tesla's adjusted earnings to increase 29% in the next year. That estimate makes the current valuation of 180 times adjusted earnings look expensive, but earnings growth may accelerate in the future as Tesla earns more revenue from FSD and scales its robotaxi business. In other words, the current valuation may be less expensive in hindsight. Personally, I doubt Tesla stock will fall 49% as Joseph Spak at UBS suggests. But I would caution investors that shares could fall sharply. The 75% gain post-election reflects the belief that Musk's ties with President-elect Donald Trump will benefit Tesla. That may be true, but the stock will likely be volatile without tangible proof. Shareholders uncomfortable with that should consider trimming their positions. Palantir reported impressive financial results in the third quarter. Its customer count rose 39% to 629, and the average existing customer spent an additional 18%. In turn, revenue increased 30% to $725 million, the fifth straight sequential acceleration. Meanwhile, non-GAAP earnings increased 43% to $0.10 per diluted share. Management also raised its guidance, such that full-year revenue is now forecast to increase 26% in 2024. Demand for Palantir's AIP product (its new artificial intelligence platform) was an instrumental growth driver in the quarter. AIP enhances its core data analytics platforms, Gotham and Foundry, with support for generative AI. "The release of our newest platform, AIP, has transformed our business," CEO Alex Karp wrote in his letter to shareholders. Forrester Research analysts recently ranked Palantir as a leader in artificial intelligence and machine learning platforms software. That bodes well for the company. Spending on AI platforms is forecast to increase at 51% annually through 2028. "AI platforms will be the fastest growing technology in the years to come," according to Andrea Minonne, research manager at the International Data Corporation (IDC). However, Palantir has a serious valuation problem. Wall Street expects adjusted earnings to grow 31% in the next year. That consensus estimate makes the current valuation of 210 times adjusted earnings look absurdly expensive. The share price appreciation witnessed this year has primarily been driven by multiple expansion, not earnings growth. That is unsustainable. I doubt Palantir shares will plunge 62% as Brent Thill at Jefferies suggests. But shareholders with big positions should consider selling some (or even all) of their shares. Palantir is undoubtedly executing on a massive opportunity, but not even the best business is worth buying at any price. In this case, the valuation is utterly disconnected from business fundamentals.

Can C3.ai Become the Next Palantir Technologies? | The Motley Fool

Palantir Technologies (PLTR 2.09%) stock was in red-hot form in 2024 as investors showed increasing interest in this software platforms specialist thanks to strong demand for the company's artificial intelligence (AI)-focused offerings, which led to nice accelerations in its top- and bottom-line growth. As of this writing, the stock is up an eye-popping 380% this year, and now trades at an extremely rich valuation. With a price-to-sales ratio of 75 and a trailing earnings multiple of 412, Palantir is not an ideal candidate for investors looking to buy an artificial intelligence (AI) stock at a reasonable valuation. Of course, the forward earnings multiple of 217 indicates that the company's bottom line is expected to improve remarkably in the coming year, but that rich valuation also means that any signs of weakness in Palantir's growth story could send the stock spiraling downward. There is a good chance that Palantir can sustain its impressive growth in the long run considering the lucrative AI software platforms market that it is serving, but it's still a risky investment. Those looking for a more reasonably priced company that's trying to capitalize on this opportunity might want to consider C3.ai (AI 0.70%). Its stock notched more modest gains of 23% in 2024 and has been in the news for the wrong reasons of late. But it's also trading at significantly cheaper valuations than Palantir and is tapping a similar addressable market. As such, now would be a good time to ask if C3.ai can follow in its bigger peer's footsteps and deliver eye-popping gains to investors. According to market research firm IDC, the AI software platforms market generated $28 billion in revenue in 2023. The firm forecasts that this market could be worth a whopping $153 billion by 2028, which means that there is room for more than one company to thrive in this space. Both Palantir and C3.ai are thus far just scratching the surface of a massive opportunity. Palantir's revenue over its past four reported quarters was $2.65 billion. C3.ai, on the other hand, generated $325 million. More importantly, both companies saw upticks in their growth rates since the beginning of 2023. What's more, both companies reported almost identical growth rates in their latest quarters. While Palantir's revenue increased 30% year over year to $726 million in the third quarter of 2024 to $726 million, C3.ai's top line jumped 29% year over year to $94 million in its fiscal 2025 second quarter, which ended on Oct. 31. Both also increased their full-year revenue guidance as the demand for their generative AI software solutions increased among both commercial and government customers. It is worth noting that Palantir initially made its name by supplying software platforms and analytics solutions to U.S. government agencies, but it has lately been focusing on winning more commercial customers in the enterprise AI software space. A similar story is unfolding at C3.ai. The company has "entered into new and expanded agreements with the U.S. Department of Defense, the U.S. Air Force, the U.S. Navy, the U.S. Army, the U.S. Marine Corps, the Defense Logistics Agency, and the Chief Digital Artificial Intelligence Office, among others," CEO Tom Siebel said the latest earnings conference call. Meanwhile, C3.ai has partnered with major cloud service providers such as Microsoft, Amazon, and Google to ensure a broader reach for the 100-plus enterprise AI applications that it offers. The company also offers an enterprise AI application development platform that allows customers to build their own solutions, apart from industry-specific solutions that help customers integrate generative AI into their operations. The company, in short, seems to be positioning itself to make the most of the huge addressable opportunity in the AI software market. But will that be enough for it to succeed to the degree that Palantir has? C3.ai is currently a much smaller company than Palantir. However, its top-line growth was almost the same as Palantir's last quarter, and both companies have enjoyed an uptick in their growth in the past couple of years. In addition, both companies expect to report a 25% increase in their top lines in the current fiscal year. Palantir's revenue is expected to land at $2.79 billion in 2024, while Palantir is expected to clock $388 million in revenue in the current fiscal year. Analysts anticipate robust double-digit percentage growth over the next couple of years as well. Even better, analysts have increased their growth expectations from both companies. That's not surprising considering the size of the markets they serve, and there is a good chance that their growth prospects could continue improving as the adoption of generative AI software increases. So, even though C3.ai is expected to remain a smaller company than Palantir over the next couple of years, its solid growth and end-market opportunities make it an ideal alternative for anyone looking to benefit from the growth of the AI software market at a reasonable valuation. After all, C3.ai's sales multiple of 13 is less than a fifth of its bigger counterpart, even as their growth rates are almost equal. That's why investors looking for the next Palantir would do well to keep C3.ai on their watch lists or buy it now, as its improving growth profile could lead to healthy share price gains.