Palantir Technologies: Riding High on AI Demand and Nasdaq-100 Hopes
A Stellar Year for Palantir
Palantir Technologies (NYSE: PLTR) has been on a tear, with its stock surging over 250% year to date. The driving force behind this remarkable performance is strong demand for its artificial intelligence (AI) platform, as well as excitement surrounding its recent addition to the S&P 500.
Nasdaq-100 Bound?
Last week, Palantir announced plans to relist on the Nasdaq exchange, effective November 26. The company expects to meet the eligibility requirements of the Nasdaq-100 index once the move is complete. This transition is likely to improve the liquidity and visibility of the stock, which could lead to further gains for shareholders.
What History Tells Us
Historically, companies added to the Nasdaq-100 have seen their stock prices rise significantly. Over the past five years, the average return for companies added to the index has been around 11% during the 12-month period following their inclusion. Looking back over the past decade, the average return has been an impressive 17%. While past performance is no guarantee of future results, this data suggests that Palantir shareholders could be in for a treat.
The Business Behind the Hype
Palantir specializes in data analytics and artificial intelligence, offering platforms that help commercial organizations and government agencies integrate complex data, develop machine learning models, and query data to surface insights. Its core platforms, Foundry and Gotham, are used by manufacturers to optimize production, retailers to manage inventory, and government agencies to identify potential threats.
Impressive Financial Results
Palantir reported strong financial results in the third quarter, beating forecasts on both revenue and earnings. Revenue increased 30% to $726 million, while non-GAAP earnings soared 43% to $0.10 per diluted share. CEO Alex Karp attributed the company’s success to the release of its newest platform, AIP.
A Tricky Choice for Investors
While Palantir is executing well on its AI/ML opportunity, the stock trades at a lofty 175 times adjusted earnings. This valuation looks expensive, even assuming earnings growth of 40% annually through 2028. As a result, investors may want to exercise caution and consider other AI stocks trading at more reasonable valuations.
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