Every Investor in Palantir Should Monitor This Crucial Metric
Palantir Technologies (PLTR dropping by 3.72%) has been among the biggest victors on the stock market this year. The data fusion wizards have seen an astonishing increase of 379% as of December 26th. Their expertise in artificial intelligence (AI) has propelled them to the forefront of the AI software market, thanks to their new AI platform, and they're witnessing a surge in both government contracts and commercial business.
Palantir has now delivered five consecutive quarters of heightened revenue expansion and eight consecutive quarters of expanding operational margins, indicating that their business is swiftly gaining ground. Throughout this journey, the company has achieved profitability according to Generally Accepted Accounting Principles (GAAP) and gained entrance into the S&P 500 (^GSPC plummeting by 1.11%).
However, Palantir's stock value has escalated at a far faster pace than its actual growth. Consequently, its valuation has inflated considerably. The stock currently boasts a stratospheric price-to-sales ratio of 75, signifying that sky-high expectations are embedded in Palantir's market value.
In more recent times, shares have skyrocketed after a robust third-quarter financial results announcement and the election of Donald Trump, stoking expectations of escalating government defense and intelligence spending under the next administration, thus bolstering Palantir's bottom line. Most recently, shareholders have warmly welcomed news that Palantir is collaborating with defense tech start-up Anduril to establish a consortium to bid on defense contracts, posing a challenge to established players like Lockheed Martin, RTX, and Boeing.
To put it simply, Palantir has experienced significant growth primarily due to improving sentiment. For the stock to carry on climbing or preserve its gains, it needs to persistently amplify its revenue expansion. It'll take a significant amount of time for the stock to align with its lofty valuation if revenue growth persists at 30% or decelerates from there.
Thus, revenue growth appears to be the crucial indicator guiding Palantir's stock price growth. Keep a vigilant eye on this metric in the future, as it is likely to dictate whether the stock continues to climb in 2025.
Investors looking to capitalize on Palantir's growth potential may want to consider allocating some money towards buying its stocks, given the company's impressive revenue expansion and expanding operational margins. To maintain its current stock price or continue rising, Palantir needs to sustain its revenue growth, making it essential to closely monitor this financial metric in the future.
