Palantir inventory has been on a tear, and the corporate’s many catalysts counsel shares might proceed hovering.
On Sept. 30, 2020, knowledge analytics specialist Palantir Technologies (PLTR 6.22%) went public.
At the time, the funding neighborhood was fairly torn on Palantir’s prospects. On one aspect of the equation, the retail investing neighborhood was enamored with it — thanks largely to the corporate’s CEO, Alex Karp. But on the opposite aspect, institutional cash managers and Wall Street analysts remained broadly skeptical, with many referring to it as a consulting agency or authorities contractor, and fewer in order a know-how innovator.
Over the final 4 years, Palantir has skilled many ups and downs. However, for the reason that synthetic intelligence (AI) revolution took the world by storm in late 2022, it has steadily climbed the ladder and emerged as a formidable chief within the area.
Below, I’m going to clarify how Palantir catapulted to management of the AI pack and discover a number of catalysts that ought to assist proceed producing progress over the long term.
Palantir is sitting with some fairly unique firm
In early 2023, Palantir made a chess transfer for the ages. The firm launched its fourth main software program product, the Artificial Intelligence Platform (AIP). Through immersive seminars known as “boot camps,” potential clients can demo AIP and determine makes use of for the corporate’s software program whereas determining the way it can match into their broader know-how stack.
Over the final 12 months and a half, AIP has turn into an absolute bellwether for Palantir, serving to the corporate to reaccelerate its legacy authorities enterprise by profitable bigger contracts, whereas concurrently serving as a ticket into the non-public sector. AIP’s widespread adoption has fueled a brand new section of progress underscored by accelerating income, wider revenue margins, and constant constructive web revenue and free money movement.
For a number of quarters, some skeptics put forth the concept the corporate was solely benefiting from the AI frenzy, and that it is progress might very effectively contract ought to synthetic intelligence wind up being a bubble.
But over time, this doubt-filled narrative has dissipated, and the enterprise has lastly joined some fairly unique firm. For starters, it earned a spot within the S&P 500 earlier this 12 months, and as of this writing, it’s the greatest performing inventory within the index in 2024.
The mixture of an encouraging progress outlook and entry into the S&P 500 has fueled institutional shopping for within the inventory — including a layer of legitimacy to the corporate past being a darling of the retail neighborhood.
More just lately, Palantir switched from the NYSE to the Nasdaq. I feel it’s only a matter of time earlier than the corporate joins one other unique membership: the coveted Nasdaq-100 index. Should this happen, it is going to be sitting among the many world’s main progress shares and know-how corporations along with the S&P 500, which I feel will put it on much more radars.
Image supply: Getty Images.
Big tech cannot get sufficient of Palantir
One of Palantir’s most refined catalysts come from strategic alliances. While you might assume that AIP has some intense competitors, think about that lots of the world’s largest know-how companies are selecting to accomplice with Palantir versus competing head-to-head.
Earlier this 12 months, Microsoft and Oracle introduced partnerships with Palantir, each of which will probably be integrating their respective cloud platforms with the corporate’s foundational AI fashions.
And simply final month, Amazon and Meta Platforms additionally introduced their very own partnerships with Palantir AIP.
I see large tech as a significant contributor for Palantir’s future because it appears to additional penetrate core markets by way of AIP. Another approach of claiming that is that the boot camp technique is barely going to work for thus lengthy.
To me, the partnerships referenced above add one other supply of producing leads for Palantir — and these sources of progress are so new that they’re but to essentially bear a lot fruit for the corporate as of now.
Valuation is my solely hesitation
The one downside I see with Palantir is its hovering valuation. At a price-to-sales ratio (P/S) of 66, it’s the most costly inventory within the peer group listed under by a mile.
Moreover, the corporate has skilled an unprecedented stage of valuation enlargement during the last two months specifically — primarily pushed by a formidable third-quarter earnings report and extra bulletins of how large tech is popping to AIP for its personal profit.
PLTR PS ratio, knowledge by YCharts.
Lucrative alternatives forward gas additional upside
Investing in Palantir proper now could be a troublesome name. In reality, a few of Wall Street’s most revered hedge funds have been taking earnings and lowering publicity to the inventory as of late.
On the floor, I perceive this method. No inventory strikes up ceaselessly, and sooner or later, momentum simply has to decelerate. But on the similar time, it is fairly clear that the corporate has some profitable alternatives that are not even accounted for in its precise progress but.
I feel an affordable method may very well be to dollar-cost common into the inventory at completely different value factors over a very long time horizon. While I absolutely acknowledge that there are extra affordable entry factors for the corporate’s shares, I feel there’s extra upside from the corporate’s catalysts than there’s draw back in a sell-off — ought to one happen sooner or later.
For long-term traders, I feel Palantir is a no brainer AI alternative and deserves a spot in your portfolio heading into subsequent 12 months.
John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of administrators. Randi Zuckerberg, a former director of market improvement and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool’s board of administrators. Adam Spatacco has positions in Amazon, Meta Platforms, Microsoft, and Palantir Technologies. The Motley Fool has positions in and recommends Amazon, CrowdStrike, Datadog, Meta Platforms, Microsoft, MongoDB, Oracle, Palantir Technologies, ServiceNow, and Snowflake. The Motley Fool recommends the next choices: lengthy January 2026 $395 calls on Microsoft and brief January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure coverage.
