Palantir's Stock Soars Amid AI Boom: Analysts Divided on Valuation

Is Palantir Stock Too Expensive at $43? | The Motley Fool

Data analytics software company Palantir Technologies (PLTR -2.23%) has experienced a lot of ups and downs since going public in late 2020. Shortly after its IPO, Ark Invest CEO Cathie Wood frequently tuned into financial news programs touting Palantir's potential. Unsurprisingly, the stock soared. But this rise to the top of the software arena was short-lived. The next couple of years proved tough for Palantir, as enterprise software in general witnessed declining growth on the backdrop of a troubled economy. By the beginning of 2023, Palantir's stock price was a mere $6. However, the technology sector has witnessed a sharp bounce back over the last year and a half due to rising interest in artificial intelligence (AI). Palantir has been a beneficiary of AI tailwinds, and investors are rejuvenating the stock. Since Jan. 1, 2023, shares of Palantir have rocketed by 575%. Below, I'll dig into Palantir's $43 share price and analyze if the stock is too expensive right now. Considering Palantir stock has risen by such outsize magnitudes, it's natural to wonder what catalysts are fueling the stock. Tying the stock action purely to demand for AI services is not enough of an explanation. Here are five core ideas that I think are pushing Palantir stock to new highs. 1. Revenue acceleration: The chart below illustrates Palantir's quarterly revenue growth since going public. While the company's top line has steadily risen, there are some notable time periods to call out. Between 2021 and 2023, Palantir's revenue managed to increase but in an inconsistent fashion. As the chart indicates, there are some noticeable periods of more protracted growth that left some investors questioning Palantir's potential. However, in early 2023 the slope of the revenue line began to steepen quite a bit. This is no coincidence. The company released its fourth major software suite, the Palantir Artificial Intelligence Platform (AIP), in April 2023. Since its release, Palantir's growth has started accelerating again. While AIP has been a success for Palantir so far, there's more to the picture contributing to the company's growth. 2. Use cases: For much of its history, Palantir relied mostly on government contracts -- specifically with the U.S. military and adjacent agencies. The advent of AIP has changed this dynamic dramatically. To help market the release of AIP, Palantir has hosted immersive seminars during which business leaders can demo the company's products. The idea is for corporations to identify a use case leveraging Palantir's AI software. This approach has been a big hit so far. Over the last couple of years, Palantir has really diversified its business and is now growing significantly in the private sector. 3. Profitability: The combination of top-line acceleration and a successful penetration of commercial enterprises has led to wider operating margins and consistent profitability for Palantir. By reaching consistent profitability, Palantir became eligible for inclusion in the S&P 500. The company officially began trading as a member of the S&P 500 in September, which I think is a nod supporting the company's long-term outlook. In other words, if Palantir's growth was only thanks to the AI boom then it likely would not have received inclusion in the index. 4. Institutional buying: Becoming a member of the S&P 500 is a respectable milestone. But I think the real tailwind of becoming part of the index will be the potential for more institutional investors to consider a position in Palantir. 5. Partnerships: The last idea I want to cover is Palantir's relationship with big tech. Earlier this year, the company signed strategic partnerships with AI bigwigs Microsoft and Oracle. Moreover, the company continues to be a core player in the public sector -- a particularly lucrative opportunity as AI becomes a more integral component of defense tech. While all of the factors above suggest Palantir has a bright future, it's imperative that investors take a hard look at the valuation fundamentals. Right now, Palantir trades at a price-to-earnings (P/E) multiple of 256. Candidly, this is so high that it's not really an appropriate measure. The bigger idea here is that even though Palantir is finally profitable, the company's net income is still pretty small. Although Palantir has several catalysts that could help expand its profits, I think it's fair to say that the P/E ratio is disconnected from the current fundamentals of the business. Furthermore, even on a price-to-sales (P/S) basis Palantir's valuation expansion cannot be denied when compared to other AI software-as-a-service (SaaS) peers. My honest opinion regarding Palantir is that the stock is a bit overbought at the moment. While I am a bull and currently own the stock myself, investors need to be careful buying into opportunities with outsize momentum. A lot would need to go wrong for Palantir stock to go back to $6. But with that said, could a 20% sell-off happen? You bet. At the end of the day, buying shares now or waiting for a more reasonable valuation is purely your preference. Above all else, keep in mind that trying to time the perfect moment to buy a stock is impractical. Instead, you should be thinking about the long-term secular tailwinds fueling specific market themes and do your best to identify which companies will emerge as winners. To me, Palantir fits these criteria in terms of AI. It's important to remember that growth stocks carry outsize volatility, and no company is immune to macroeconomic forces. Although I still believe in Palantir, I think buying at this price requires the knowledge that you're investing at a premium valuation. While that's not a bad thing per se, investors need to be thinking long term with this opportunity.

Should You Buy Palantir Stock? Wall Street Gives a Clear Answer That May Surprise Investors. | The Motley Fool

Palantir shares have more than doubled this year due to unchecked enthusiasm about its artificial intelligence software. Palantir Technologies (PLTR -0.25%) has been one of Wall Street's hottest artificial intelligence (AI) stocks this year. Shares have surged over 150% in 2024 amid enthusiasm about AI, encouraging financial results, and the company's inclusion in the S&P 500 (SNPINDEX: ^GSPC). Somewhat surprisingly, Wall Street is overwhelmingly bearish after that tremendous price appreciation. Among the 23 analysts that follow Palantir, the median price target is $27 per share, which implies 38% downside from its current share price of $43.50. In other words, most analysts believe Palantir is overvalued. Here's what investors should know about the company. Palantir helps businesses make sense of data. Its primary platforms, Gotham and Foundry, let users ingest information, develop machine learning models, and surface insights with analytical applications that improve decision-making. The company has also introduced its Artificial Intelligence Platform (AIP), which brings support for large language models and generative AI to Gotham and Foundry. Some analysts have praised Palantir. In August, Forrester Research recognized its leadership in machine learning and artificial intelligence platforms. "Palantir is quietly becoming one of the largest players in this market," analysts wrote. And Palantir achieved the highest ranking in Dresner Advisory Services' most recent report on artificial intelligence, data science, and machine learning software vendors. However, other analysts are less impressed. Gartner scored Palantir below a dozen other vendors for its data integration tools, and did not even consider Palantir in its latest report on data science and machine learning platforms. And last year, RBC Capital analyst Rishi Jaluria opined that Palantir's software "does not appear to be anything truly differentiated when it comes to generative AI." Those disagreements notwithstanding, Palantir reported encouraging financial results in the second quarter. Its customer base increased 41% and the average customer spent 14% more. In turn, revenue rose 27% to $678 million, the fourth straight acceleration, and non-GAAP earnings surged 80% to $0.09 per diluted share. CEO Alex Karp ascribed those strong financial results to demand for AIP, and he gave upbeat insight about the future. "The persistent and unbridled demand for our software, for an effective enterprise platform that makes artificial intelligence capabilities useful to large institutions, shows no sign of relenting," he wrote in his recent shareholder letter. The International Data Corp. (IDC) estimates AI platform spending will grow at 41% annually through 2028. Meanwhile, Grand View Research estimates the data analytics software market will grow at 27% annually through 2030. Palantir is well positioned to capitalize on those opportunities, though analysts disagree about the extent to which the company will benefit. Palantir stock had climbed 55% year to date by Aug. 6, the day after the company reported second-quarter financial results. That share price appreciation was arguably justified by solid execution and the massive opportunity surrounding its AIP product. But shares have continued to trend higher since then, often without good reason. Palantir stock jumped 14% in a single day in September when S&P Global announced that the company would join the S&P 500. Inclusion in the index was certainly validating, but it did not fundamentally change Palantir. The company will neither earn more revenue nor become more profitable because it was added to the S&P 500, so the subsequent price appreciation -- which now totals 44% -- seems quite irrational. Moreover, Wall Street expects Palantir's adjusted earnings to increase 22% over the next year. That makes the current valuation of 137 times adjusted earnings look absurd. Those numbers give it a PEG ratio above 6. For context, PEG ratios below 1 are generally considered cheap, while PEG ratios between 1 and 2 may be viewed as reasonable. Personally, I see only two possible outcomes. Either Palantir justifies its current valuation with faster-than-expected earnings growth, or the share price suffers a major correction at some point. In both scenarios, the stock is a risky investment best avoided right now.

Palantir Stock: Buy at the High? | The Motley Fool

It's important to consider your investment style before making any decisions... Palantir Technologies (PLTR -0.02%) has become one of the latest companies to stand out in the high-growth area of artificial intelligence (AI). Even though this technology player has been around for about 20 years, earnings have truly taken off in recent times. This is thanks to Palantir's Artificial Intelligence Platform (AIP), launched just last year, along with a surge in interest from commercial customers -- in the past Palantir was most associated with government contracts. And all of this has helped Palantir stock to soar 150% so far this year. In fact, the stock has reached its highest level ever, trading at valuations many would call expensive and well surpassing Wall Street's average price estimate of about $28. At this point, is it a good idea to hold off on buying this high-momentum stock, or should you buy Palantir at the high? Let's find out. First, a little background on Palantir's path so far. The software company helps governments, companies, and organizations aggregate their data in order to make the best use of it. While this many not sound exciting, it actually is -- and often delivers results that are game-changing and/or help a customer register enormous savings in costs and gains in efficiency. For example, Palantir's systems for Cleveland Clinic help optimize patient placement, forecast bed availability, and boost overall efficiency at the hospital. United Airlines is using Palantir to help it manage equipment issues -- to ensure maximum uptime. Since the launch of this predictive maintenance system, Palantir has helped United save millions of dollars through the avoidance of flight delays and cancellations. In Palantir's earlier days, government contracts drove growth, and the company steadily but slowly increased revenue. But in more recent times, and with the launch of AIP, Palantir has posted double-digit revenue growth and has seen a massive gain in its commercial business -- so that U.S. commercial growth now surpasses that of government revenue growth. In the most recent quarter, U.S. commercial revenue advanced 55% to $159 million and U.S. commercial customer count jumped 83% to nearly 300. It's important to remember that Palantir had only 14 U.S. commercial customers four years ago -- so growth here truly has surged. Government revenue also continues to make impressive gains, climbing 23% in the quarter, so the company can count on both its traditional revenue driver as well as the new source of gains found in the commercial business. Considering AIP launched rather recently, we're in the early stages of this platform's growth story, and this is reinforced by demand so far. The "persistent and unbridled demand... shows no sign of relenting," chief executive officer Alex Karp wrote in a recent shareholder letter. Palantir has devised a genius way of getting new customers on board. The company has created AIP boot camps to introduce the platform and help potential users spin up a use case in mere hours. In Palantir's latest earnings call, the company said it closed a seven-figure deal with a big wholesale insurance broker about two weeks after a boot camp -- and this isn't an isolated event. So, the bootcamp system is working and driving significant growth. Finally, in the latest quarter, Palantir brought in $134 million in net income -- its highest quarterly profit ever. All of this paints a bright picture for Palantir today and offers us reason for optimism about the future. But should you really buy Palantir at the high? The stock today looks expensive, trading at more than 122x forward earnings estimates. That makes it pricier than any of the Magnificent Seven stocks, the technology players that drove stock market gains earlier this year. The answer to our question has to do with your investment style. If you're a value investor, Palantir isn't the right stock for you, and if you're a growth investor focused on bargains, you probably wouldn't choose Palantir at these levels. But if you're a growth investor who doesn't mind paying more for a stock today -- with the idea that the earnings picture could change greatly, in a positive way, in the years to come -- then Palantir may be a good choice for you. Palantir is in the early days of this new growth story, led by AIP and new demand from commercial customers, and the AI market is in its early days of growth too. Today's $200 billion AI market may reach $1 trillion by the end of the decade. All of these elements together suggest that even if you buy Palantir right now at the high, you could still have a lot to gain over the long term.

Up 141% This Year, Can Palantir Technologies Stock Continue Soaring Higher? | The Motley Fool

The company is betting on its Artificial Intelligence Platform to fuel growth. One of the top artificial intelligence (AI) stocks to own this year has been Palantir Technologies (PLTR 4.05%). Its new AI platform, AIP, has unlocked major opportunities for the business, and revenue growth is accelerating, fueling bullish investor sentiment around the business. And now that the tech stock has joined the S&P 500, there's even more excitement surrounding Palantir, and its stock hit a new 52-week high on the news. Today, the stock is fast approaching its all-time high thanks to a 141% year-to-date gain. Is it too late to invest in this scorching-hot AI stock, or can shares of Palantir go even higher? Palantir's platform has ranked well in a report from Forrester Research, and it appears to be a top vendor for AI solutions that help customers automate processes and make better decisions along the way. The data analytics company has routinely announced deals with new customers. In the quarter ended June 30, Palantir's revenue was up 27% year over year with particularly strong growth in its U.S. commercial segment where sales jumped 55%. For full-year 2024, the company expects its U.S. commercial business to grow at least 47%, while its top line will come in at around $2.75 billion for an overall growth rate of 23%. These encouraging results suggest the business is moving in the right direction. But with the stock trading at 244 times trailing earnings and 40 times revenue, do investors have to pay too high of a premium for the business? Is it worth it given the potential headwinds? Palantir's hefty valuation means a lot of future growth is priced into its shares, and any bump or hiccup along the way could derail the stock. Investors shouldn't forget that in 2022, bearishness across the tech sector sent Palantir stock tumbling 65% for the year. It has recovered and business looks good now, but weakening economic conditions could result in companies cutting back on AI-related spending. Meanwhile, the U.S. government is looking to tap more tech companies so it isn't as reliant on a single vendor, according to a report from The Wall Street Journal earlier this year. Government revenue still accounts for the majority of Palantir's top line, but it grew at a slower 23% pace last quarter, meaning the commercial segment is catching up quickly. Palantir's business looks a lot safer than it was a year or two ago now that the company is routinely posting profits. But at such an inflated valuation, it may be difficult for the stock to outperform in the long run. The excitement around the S&P 500 inclusion has given shares a boost, but ultimately, the stock's fortunes are tied to growth. And Palantir isn't growing at a rate high enough to justify paying such mammoth earnings and revenue multiples for the stock. With this amount of hype priced into the stock already, there is a very real risk of a future correction. Even if you're buying Palantir with a long-term mindset, there are better AI stocks out there.

Palantir Stock: Buy, Sell, or Hold? | The Motley Fool

Despite its massive run-up this year, perhaps no company is quite as divisive among investors at the moment as Palantir Technologies (PLTR 4.05%). The share price for this tech stock, which was just added to the S&P 500, has more than doubled this year and was among the market's top performers last quarter. Given that strong performance, it is no surprise that many investors wonder if Palantir stock is a buy, sell, or hold. Let's look at the cases for each. While Nvidia has been the biggest artificial intelligence (AI) beneficiary on the hardware side, Palantir has the opportunity to be among the biggest beneficiaries on the software side. The company already established itself as one of the top analytics providers in the world by helping the U.S. government fight terrorism and track the spread of COVID-19 during the pandemic. Its new Artificial Intelligence Platform (AIP) expanded the use cases for Palantir's technologies and is being rapidly adopted by commercial customers. The company is getting wins from clients across various industry verticals, including healthcare, insurance, energy, industrials, restaurants, and retailing. The breadth of the industries Palantir is serving is impressive, as AIP helps customers build AI apps, actions, and agents to solve complex problems. AIP also has out-of-the-box AI solutions as well as starter packs and templates that can be customized if needed. The company is seeing impressive growth in its U.S. commercial segment, with revenue growing 55% year over year last quarter, as it brings in new customers through its boot camps. These five-day camps help potential customers understand how to apply AI to crucial operations. The strategy is working as U.S. commercial customers grew by 83% year over year in the second quarter. Moving all these new customers from the prototypes they create in its boot camps to production is Palantir's biggest opportunity. The company is already seeing solid net dollar retention, up 114% last quarter, but that number does not reflect the new customers it has added in the past year with its boot camps. Palantir said this transition has been very difficult for most companies but that it has been able to do so smoothly, as demonstrated by a recent expansion with Tampa General Hospital. The "expand" part of Palantir's land-and-expand strategy is about to really kick in and help accelerate growth in the future. Meanwhile, Palantir continues to win new U.S. government contracts, which should help reaccelerate growth from its largest client. These include a $99.8 million deal over the next five years for the military to use its AI-powered Maven Smart System to help improve battlefield awareness. Right now, the company has a lot of opportunities and could just be scratching the surface of its potential. For the sell case, investors need look no further than the company's executives, who are doing just that: selling Palantir stock. Chairman Peter Thiel sold 28.6 million shares between Sept. 24 and Oct. 1. The speed at which Thiel dumped so many shares speaks volumes. He also sold 7 million shares in March and nearly 13 million in May. CEO Alex Karp also greatly accelerated his stock sales. Between Sept. 13 and 17, he exercised and sold 9 million options at an exercise price of $11.38 that were not set to expire until 2032. Karp has sold shares before, but this was his largest sale by number of shares since he sold at the IPO and a big step up from the 575,000 shares he sold in August and the 729,000 he sold in May. Other company executives and directors have also picked up their selling, all seemingly triggered by the stock's rise in price. And that leads to the biggest reason to sell Palantir stock: its valuation. The stock trades at a forward price-to-sales multiple (P/S) of 26 based on next year's analyst estimates. Very fast-growing, high-margin software-as-a-service (SaaS) companies can command high multiples, but a forward P/S of 26 for a company that grew revenue 27% last quarter is pretty extreme. For example, CrowdStrike is expected to grow a bit faster than Palantir this year, but its stock trades at a P/S ratio of less than 15. The hold case for Palantir simply comes down to thinking the stock can accelerate and grow into its hefty multiple in the next few years. Palantir could generate sales of about $6 billion in 2027 if it manages 30% revenue growth each of the next three years (a rate higher than its current pace). At a P/S of 15, the same as CrowdStrike, the price would be about $41, close to where it trades today. At 35% sales growth, it would generate 2027 revenue of $6.8 billion, and at a P/S of 15, it would be a $46 stock. At 40% growth, it would generate 2027 revenue of $7.6 billion, and at a P/S of 17, it would be a $59 stock. If it grows at 40%, I would expect a higher multiple, which is why I used 17 times in this scenario. In the latter scenario, it would certainly be worth holding the stock, although that type of growth acceleration would be quite extraordinary. At this point, I would follow Palantir management's lead and at least sell some stock if I owned it. The executives seem to think selling shares when they are above $35 is the right move. The future for the company is bright, but its valuation is well ahead of itself at this point. Holding or buying the stock is really betting that the company can accelerate its revenue growth closer to 40% or more and sustain it over the next few years. While it's possible, it wouldn't be easy. But if Palantir becomes the dominant AI software winner, much like Nvidia did in hardware, the sky is the limit.

Palantir - Impressive price gains. Is the stock overheated? | Investing.com UK

Palantir shares, which are listed on the New York Stock Exchange (NYSE), have risen by 57.42% in the last three months. Since the beginning of the year, the increase has been over 153% (as of 10 October 2020), which is particularly remarkable given that the company is often the subject of controversy. A controversial business model Palantir Technologies (NYSE:PLTR), co-founded by Peter Thiel in 2004, specialises in data analysis. The Palantir Gotham division works closely with security agencies and intelligence services in Western countries. Since the company usually keeps its business and customers secret, it often remains shrouded in mystery. Palantir profits from crises According to 'sharedeals.de', geopolitical tensions play an important role in the recent rise in Palantir's share price. The escalating conflicts in the Middle East, particularly Israel's war in the Gaza Strip and Lebanon, as well as the threat of conflict with Iran, are increasing demand for Palantir's technologies. In September, Palantir received a contract from the US Department of Defense worth almost $100 million. The US military uses Palantir's AI tool Maven Smart System, which is used, among other things, to identify targets for air strikes in the Middle East. In Ukraine, Palantir's software is also used by the army for military decisions. Growth in the commercial sector In addition to the public sector, Palantir is also growing in the commercial sector, particularly through the introduction of AIP, an AI solution that enables companies to integrate artificial intelligence and machine learning technologies into their own networks. This not only increases data security, but also reduces data transmission and storage costs. In early October, Palantir announced a partnership with Edgescale AI. Together, they are developing 'Live Edge,' a platform that uses AI technology to process data from machines, sensors, and networks. This is intended to increase automation and productivity. We believe this foray into the commercial sector is a very important step, as this market is likely even larger than the government market. So Palantir is still on the fast track. So will the stock continue to rise, or is a correction coming? And if so, will it be a big one? We think the stock has already run a long way and will need a breather soon. Either right now or only in the area of the red box at the top of the chart at $44.86 to $49.91, a significant high is to be expected. Then the stock should enter a correction, the target of which we see within the purple box at $39.14 to $32.74. This is an excellent opportunity to buy the stock, because further increases are to be expected afterwards. What we should also know: the previous all-time high is exactly at $45.00. As a rule, stocks fail to break through this level on the first attempt. We can use this to buy the stock again at a lower price. In the long term, we expect prices well above the previous all-time high. No matter where we look, We see opportunities. We are in an extremely strong bull market. Everyone should benefit from it. But to avoid mistakes, it's a good idea to have a strong partner at your side. With us, every portfolio turns a profit. You can find out more about us on our website (the link is above next to my profile picture). By the way: as part of our autumn promotion, you get a whopping 20% discount on all our analysis packages. Voucher code: LIBERTY. Disclaimer/Risk warning: The information provided here is for informational purposes only and does not constitute a recommendation to buy or sell. It should not be understood as an explicit or implicit assurance of a particular price development of the financial instruments mentioned or as a call to action. The purchase of securities involves risks that may lead to the total loss of the capital invested. The information provided does not replace expert investment advice tailored to individual needs. No liability or guarantee is assumed, either explicitly or implicitly, for the timeliness, accuracy, appropriateness or completeness of the information provided, nor for any financial losses. These are expressly not financial analyses, but journalistic texts. Readers who make investment decisions or carry out transactions based on the information provided here do so entirely at their own risk. The authors may hold securities of the companies/securities/shares discussed at the time of publication and therefore a conflict of interest may exist.

Where Will Palantir Stock Be In 1 Year?

Palantir stock has nearly tripled over the last year, but can the company keep up the momentum? At this time last year, the stock price for Palantir Technologies (PLTR -0.02%) was under $15 per share. As of mid-morning on Oct. 9, shares of Palantir were hovering around $43 -- nearly triple where they were just one year ago. Over the last year, Palantir's software suite has garnered much attention as sophisticated data analytics platforms become a critical part of artificial intelligence (AI) roadmaps. But with shares of Palantir continuing to rise, investors need to start wondering how much longer the music is going to be playing. Below, I'll cover a number of catalysts that could spur even further growth for Palantir while also calling out some risks the company faces. What could cause Palantir stock to run higher? I see three key factors that could ignite further buying of Palantir stock over the next year. 1. Institutional Coverage and Ownership: Back in September, Palantir reached a critical milestone as it was inducted into the S&P 500. Now that Palantir is part of the exclusive index, I would not be surprised to see the company receive more attention from large financial institutions. For example, high-profile investment banks such as JP Morgan or Wells Fargo could begin covering the stock from an equity research perspective. If more analysts from Wall Street's largest banks begin to regularly report on Palantir and its prospects, the company has a good chance to land on more investors' radar. This could be a positive catalyst for the stock as it broadens Palantir's reach to a bigger pool of investors. Moreover, I also think that more hedge funds may begin taking positions in Palantir. Steadily rising institutional ownership in Palantir could also be a catalyst that charges more gains for the stock. 2. More Partnerships: Earlier this year, Palantir signed two notable strategic partnerships. The deal with Microsoft revolves around increasing AI investments in the defense sector, while the relationship with Oracle is going to integrate cloud-based workflows into Palantir's data analytics platform, Foundry. I think the deals with Microsoft and Oracle bode well for Palantir's chances to continue partnering with the tech sector's largest businesses. Such relationships can help strengthen Palantir's deal flow pipeline and provide many cross-selling opportunities, ultimately serving as lucrative catalysts for the company and the stock. 3. AI in the defense sector: One area of the AI realm that I think is misunderstood is how the technology can be leveraged in military operations. Defense tech is becoming more of a priority, and it's taking many different forms. In cybersecurity, logistics, and even simulated combat operations, AI stands to be an important piece of technology for the military. Keep in mind that nearly half of Palantir's revenue stems from government contracts with the U.S. military and its Western allies. In just the last few months, Palantir has won a number of important AI-focused deals with the Department of Defense (DOD). I suspect that as AI investments become a more mainstream feature in defense budgets, Palantir will continue to benefit from these initiatives, given the company's existing strong relationships with government agencies. What could cause Palantir stock to sell off? The chart below illustrates Palantir's revenue and net income trajectory over the last several years. Investors can see that the company's top line is accelerating while the business has finally reached consistent profitability. PLTR Revenue (Quarterly) data by YCharts Candidly, I am a little wary that the AI narrative itself is not going to be enough to keep investors interested in Palantir. While the company's growth is undoubtedly impressive, there are other data analytics platforms for large enterprises on the market. The company has a unique ability to reinvest its excess profits into areas including research and development (R&D), hiring efforts, marketing, or acquisitions. I think Palantir is going to need to introduce additional products and services sooner rather than later; otherwise, the company's future earnings reports may run the risk of being viewed as satisfactory, but not great. In turn, investors could quickly sour on Palantir and dump the stock in exchange for something more appealing. Palantir's valuation story tells itself As of the time of this article, Palantir has a market capitalization of $96 billion. As much as I am a Palantir bull, I have to concede that this valuation is pricey for a company that's only done $2.5 billion in sales over the last 12 months. PLTR Market Cap data by YCharts At some point, I think some investors are going to begin taking profits in Palantir and I would not be surprised if such an action takes place in the near-term. While I think Palantir has numerous catalysts, all of the ideas explored above are longer-term tailwinds. For this reason, I would not be surprised to see Palantir stock witness a sell-off over the next year as the company's longer-term priorities continue to develop and take shape.

Palantir Just Joined the S&P 500. History Says the Artificial Intelligence (AI) Stock Will Do This Next.

One of Wall Street's hottest AI stocks may get another boost. Is now the time to buy? Artificial intelligence (AI) is the hottest investing theme of the moment. Much ink has been spilled on the technology's awesome power and potential economic impact. Could it be as transformative as its evangelists would have you believe? PwC -- one of the "big four" accounting firms -- believes AI can add $15.7 trillion to the global economy by 2030. If that proves to be true, it certainly meets the mark in my book. While Nvidia took center stage, another AI company, Palantir (PLTR 0.90%), just passed a major milestone that may help boost its profile and stock price. Founded in 2003, the company certainly isn't new, but recent advancements in AI are supercharging the company's ability to turn a profit. The company's share price followed suit, up 150% this year alone. This made it eligible for inclusion in the S&P 500, and Palantir officially joined the index late last month. What does this mean for the company? Joining the S&P 500 is a big deal and may affect Palantir's stock price The S&P 500 is an index comprised of the 500 largest companies in the U.S. by market capitalization. It's also one of the most well-known and popular indexes around -- so popular that it's often used as a proxy for the stock market as a whole. This visibility usually translates to an uptick in investment from the retail market. Some of these investors are hearing about the company for the first time, while others see its inclusion as a mark of legitimacy. Beyond retail, however, the index is tracked by all sorts of funds, like the uber-popular SPDR S&P 500 ETF Trust or Vanguard 500 Index Fund. When a company joins the S&P, there is a flood of capital into the stock as these funds adapt to match the index. All this leads to what's sometimes called the "S&P 500 effect" -- a bump in stock price after being included in the index. Take Nvidia, for example. The chipmaker was announced as the replacement for the crumbling Enron back in November of 2001. In the month that followed, its stock price surged more than 30%. Will this happen to Palantir? Correlation is not causation Unfortunately, the effect may be more of a coincidence. A study commissioned by the Federal Reserve Bank of New York looked at the effect and found that there really isn't a lot of evidence for it, or at least that any direct effect is short-lived. Stocks that get added to the index tend to already be on an upswing. They have prior momentum. The study showed that this momentum was the primary cause of performance over the long term post-inclusion. Essentially, the positive price movement would have happened with or without being added. Still, whether it is the cause or not, the fact remains that when a company is added to the S&P 500, it tends to do well. Palantir is promising, but beware of its valuation The company is showing strong growth in its top-line revenue and tremendous reductions in operating expenses. This means huge upswings in its net income. Take a look at the chart showing the takeoff in 2022. PLTR Net Income (TTM) data by YCharts These are trends you want to see. The company is continuing to find success in the lucrative world of government contracts and announced last month that it had landed another, this time with the U.S. Army, to help overhaul its AI capabilities. The new contract means the company is now working with all five of the U.S. armed services. Palantir's as a company looks great. Its income growth looks set to continue its rapid rise. However, its ability to make money isn't the issue. Sometimes a great company can turn out to be a not-so-great investment if it's valued too high. I think that's the case here. While valuation metrics can be wonky for a time as a company finally begins to turn a profit, I can't ignore just how out of whack its stock price seems to be. It currently has a forward price-to-earnings ratio (P/E) of 103 and a price-to-sales ratio (P/S) of 41. Compare that to Nvidia, which is valued at quite a premium at the moment, which has a forward P/E of 46 and a P/S of 26. Alphabet's metrics are 21 and 6, respectively. With the stock price where it is, I can't recommend the stock to most investors. I think there are better places to put your money. However, if you are younger with a high risk tolerance and a very long time horizon, it could be an interesting play.

Should You Follow This Insider's Lead and Sell Palantir Stock? | The Motley Fool

One of the hottest names in artificial intelligence software is data analytics company Palantir Technologies (PLTR -0.02%). Over the last couple of years, it has swiftly evolved from a government contractor working closely with the U.S. military into a more prolific platform reaching major end markets in the private sector. The company's accelerated top- and bottom-line growth isn't going unnoticed, either. So far in 2024, investors have sent Palantir shares soaring 150% -- versus the near-20% returns posted by both the S&P 500 and Nasdaq Composite. But in the midst of Palantir's shining moment, the company's chairman, Peter Thiel, just sold a boatload of stock. Below, I'll break down the mechanics of insider sales and provide my opinion on whether or not now is a good time to follow Thiel's move and cash out. When insiders buy or sell stock, it's natural for outsiders to wonder what factors might have influenced the decision. The Securities and Exchange Commission goes to great lengths to establish rules to mitigate any nefarious insider transactions as much as possible. One such protocol is Rule 10b5-1. Essentially, 10b5-1 allows insiders to create a planned schedule to buy or sell stock based on certain parameters. The point is to automatically trigger buying or selling once predetermined criteria set by the insider are reached. In other words, Rule 10b5-1 helps dissipate the idea that an insider bought or sold securities based on nonpublic information. This is exactly the situation with Thiel. Between the final week of September and early days of October, the billionaire venture capitalist sold roughly 28.6 million shares of Palantir for total proceeds of about $1.1 billion. Thiel is a co-founder of Palantir and has been with the company since 2003. Even though his latest stock sale is large, this is far from the first time he took profits over the last two decades. In fact, between March and May, Thiel sold about 20 million shares across four separate transactions -- accumulating a cool $452 million in the process. As I've written many times, there is no perfect time to sell a stock. Instead, investors need to ask themselves tough questions around a company's current level of growth and what the trajectory might look like. Palantir began the year with a market cap of $35 billion. Not even a full 10 months later, it is now valued 2 1/2 times higher. This is a clear sign of outsize valuation expansion. While I am bullish on the long-term picture, it's hard not to take some profits after such an impressive run during an otherwise short time frame. At the end of the day, taking profits really depends on your personal financial situation. If you need some liquidity or would feel more comfortable stockpiling cash, now could be an appropriate time to sell some shares. The more important idea here is to keep the long-term thesis in focus. If you're optimistic that better days are ahead for Palantir and you are not in any need of raising funds, then keeping your current allocation is OK, too. I think the most prudent strategy is a happy medium of trimming your position to recoup your initial investment, while also keeping some exposure to the company.

You Won't Believe What Billionaire Investor Chamath Palihapitiya Just Said About Palantir | The Motley Fool

The Silicon Valley billionaire thinks Palantir's growth story is just getting started. Beyond the giants of big tech, one company that has emerged as a rising star in the artificial intelligence (AI) market is data analytics specialist Palantir Technologies (PLTR -0.02%). Its shares have gained about 140% year to date as they approach a new all-time high. Bringing AI systems to the world of enterprise software has been a winning move for Palantir. Its revenue growth is accelerating, operating margins are expanding, and after years of burning cash, the business itself is now consistently profitable. What isn't so clear, however, is what the road ahead could look like. During a recent episode of the "All-In" podcast, Silicon Valley billionaire Chamath Palihapitiya said that Palantir has yet to "really scale." To me, that sounds like he thinks Palantir's growth story is just getting started. The enterprise software world is brutal. There are now software-as-a-service (SaaS) tools for just about every organizational function. Members of sales teams tend to keep track of their pipelines with customer relationship management (CRM) platforms such as Salesforce or Monday.com. Marketing campaigns can be monitored using HubSpot, while leading finance and accounting tools include those offered by Intuit or Oracle. Human resources departments might rely on Workday. The point here is there are so many software platforms out there that finding the perfect combination of tools can be a time-consuming and daunting task for companies. Moreover, the first dirty secret of enterprise software is that companies' platforms often don't integrate well with the platforms of their peers. As a result, it can be difficult to use them to derive data-driven insights and build a more efficient and productive work environment. This leads to the second dirty secret of enterprise software: Customers rarely switch SaaS platforms, instead opting to renew their contracts more often than not because going through the process of picking new providers and switching over will take too much time. But according to Palihapitiya, this logjam of inefficiencies may present an opportunity for Palantir to generate exponential growth. Right now, enterprise software's newest shiny object is the large language model (LLM). In the wake of the launch of ChatGPT, a host of big tech companies followed suit. Alphabet has Gemini, Amazon has Claude, and Meta has Llama. And those are just the mainstream models -- there are loads more LLMs on the market. So while LLMs were initially seen as technological breakthroughs, the rapid introduction of additional models has made them somewhat commoditized. It can be unclear what differentiates one LLM from another. Well, in many cases, the answer to that question is data. Large enterprises tend to store various data structures across different platforms that do not layer on top of each other well. What many business leaders are beginning to realize is that using an LLM with data sources that aren't connected in a seamless way is often inefficient. This is where Palantir is really shaking things up. At roughly the 36-minute mark in the embedded video below, David Sacks, another Silicon Valley legend, explains that Palantir's software has the ability to integrate with their customers' existing digital infrastructure. But Palantir's ability to address the pain points of inefficient systems and workflows is just part of the equation. Following the explanation from Sacks, Palihapitiya put forth the idea that Palantir will be able to win new business based on competitive pricing structures when companies' contracts with other enterprise tool providers start coming up for renewal in a few years. While corporations may not fully cancel their existing contracts with their other software vendors, business leaders might have more leverage at the negotiating table when it's time to renew their deals since AI was not part of the picture when many of those initial deals were signed. But Palantir has been leveraging AI processes since it was founded two decades ago. It now has a chance to take advantage of the dynamic explained above to ink much larger deals in terms of dollar amounts and years committed. I agree with Palihapitiya that Palantir has a lucrative opportunity to become the backbone of many companies' digital infrastructures. As AI continues to become a more integral part of the overall software narrative, Palantir stands at the doorstep of a new frontier of growth that could last for several years.