A Surprising Winner in 2024: Can Palantir Technologies Continue Its Streak?
A Year to Remember
Palantir Technologies (NASDAQ: PLTR) has had an incredible 2024, with a staggering 345% return that made it the best-performing stock in the S&P 500 (SNPINDEX: ^GSPC). This impressive performance was driven by growing excitement about Palantir’s artificial intelligence platform, which has positioned the company at the forefront of a rapidly expanding market.
Riding the Momentum
History suggests that Palantir could continue its strong performance in 2025. A review of the past decade’s top-performing S&P 500 stocks reveals that they tend to maintain their momentum, with an average return of 64% in the following year. In fact, only one top-performing stock declined in the subsequent year.
The Data Speaks
The chart below illustrates the top-performing S&P 500 stocks from each year of the past decade, along with their returns in the next calendar year.
| Year | Company | Return During Listed Year | Return During the Next Year |
| — | — | — | — |
| 2014 | Southwest Airlines | 125% | 2% |
| 2015 | Netflix | 134% | 8% |
| 2016 | Nvidia | 224% | 81% |
| 2017 | NRG Energy | 132% | 39% |
| 2018 | AMD | 80% | 148% |
| 2019 | AMD | 148% | 100% |
| 2020 | Tesla | 743% | 50% |
| 2021 | Devon Energy | 179% | 40% |
| 2022 | Occidental Petroleum | 117% | (5%) |
| 2023 | Nvidia | 239% | 178% |
Palantir’s AI Platform: A Leader in the Making
Palantir specializes in data analytics software, with its core products, Foundry and Gotham, enabling businesses to integrate and make sense of complex information. The company’s artificial intelligence platform, AIP, adds support for large language models to its core products, allowing users to engage with Foundry and Gotham using natural language. Forrester Research recently recognized Palantir as a leader in artificial intelligence and machine learning platforms, awarding AIP higher scores than similar tools from Alphabet-subsidiary Google.
Strong Financial Performance
Palantir reported strong financial results in the third quarter, beating estimates on the top and bottom lines. Revenue increased 30% to $725 million, and non-GAAP earnings rose 43% to $0.10 per diluted share. The company’s 40% sales growth among U.S. government clients was particularly encouraging.
A Disconnect Between Price and Fundamentals
Despite Palantir’s strong performance, its stock price has become disconnected from business fundamentals. Wall Street estimates the company’s adjusted earnings will grow at 27% annually through 2025, making the current valuation of 225 times adjusted earnings seem absurd. As a result, Wall Street is overwhelmingly bearish on Palantir, with a median 12-month target price of $39 per share implying nearly 50% downside from its current share price of $77.
A Word of Caution
While Palantir’s AI platform and strong financial performance are encouraging, investors should exercise caution due to the stock’s high valuation. Unless Wall Street is dramatically underestimating the company’s future earnings, Palantir shares are likely headed for a sharp correction at some point in the future.
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