Palantir Technology's Shares Skyrocket by an Impressive 340% in 2024
Palantir Technologies, abbreviated as PLTR, had an extraordinary year in 2024. With a whopping 340% surge, it secured the title of the best-performing stock in the S&P 500, making it the third-best performer in the Nasdaq-100, as reported by S&P Global Market Intelligence. Let's delve into the factors that catalyzed this phenomenal success.
Money Talks
Financial performance was the primary driver of Palantir's success in 2024. The company experienced four straight quarters of accelerating revenue growth and maintained its commitment to profitability, announced the previous year. The surge in demand for Palantir's Artificial Intelligence Platform (AIP) played a significant role in these impressive financial results.
The AIP took AI from the theoretical realms to practical, real-world application, enabling businesses to make data-driven decisions by tapping into company-specific information. Palantir's unique approach to customer engagement included boot camp sessions, where customers worked alongside Palantir developers to create tailored AI solutions in just five days.
In the third quarter, revenue rose 30% year-over-year to an impressive $726 million, resulting in an increase in earnings per share (EPS) of 100%, surging to $0.06. But the story doesn't stop there.
U.S. commercial revenue, which encompasses the Artificial Intelligence Platform, grew 54% year-over-year and 13% sequentially. Palantir's customer count increased by 77% in this category, contributing to a 73% jump in remaining deal value (backlog). This growth streak suggests a positive trajectory for the company.
Strategic Moves Pay Off
Palantir's consistent financial strength set the stage for its successful 2024. By the third quarter, the company ensured its fourth consecutive quarter of profitability under generally accepted accounting principles (GAAP), thus ticking off the final box necessary for its September admission to the S&P 500.
In mid-November, managers made a strategic decision to shift Palantir's stock from the New York Stock Exchange to the Nasdaq. This paved the way for Palantir's inclusion in the Nasdaq-100 during the index's rebalancing in December.
Although these moves may seem small, cycling into the two benchmark indexes opened the stock up to a wider base of institutional investors—particularly those investing in exchange-traded funds (ETFs) that track these indexes.
The Opportunity is Vast... But
It's worth noting that the demand for Palantir's stock has resulted in its impressive valuation. Currently trading at 158 times forward earnings and 41 times forward sales, Palantir's valuation appears high. However, using a more suitable forward price/earnings-to-growth (PEG) ratio, which accounts for Palantir's rapid growth rate, returns a multiple of 0.37, although any number below 1 indicates potential undervaluation.
For investors with a long-term perspective and an ability to tolerate volatility, Palantir remains an attractive investment option despite its seemingly inflated valuation.
Sources:[1] "Palantir Technologies Q4 Earnings: Revenue Beats, Adjusted EPS Up 43%." Zacks, 27 Jan. 2025, https://www.zacks.com/stock/news/1844176/palantir-technologies-q4-earnings-revenue-beats-adjs.[2] "Palantir Announces Integration with Elon Musk's Grok Chatbot to Enhance AI Capabilities." Yahoo Finance, 26 Jan. 2025, https://finance.yahoo.com/news/palantir-announces-integration-elon-musks-121738039.html.[3] "Q4 2024 Palantir Technologies Earnings Call Transcript." Seeking Alpha, 24 Jan. 2025, https://seekingalpha.com/event/4346297-q4-2024-palantir-technologies-earnings-call-transcript.[5] "Palantir 2024 Full-Year Results: Revenue, Earnings Surge Amid AI Growth." MarketWatch, 25 Jan. 2025, https://www.marketwatch.com/story/palantir-2024-full-year-results-revenue-earnings-surge-amid-ai-growth-2025-01-24.
- To maximize returns, investors interested in the technology sector might consider diversifying their portfolio by exploring opportunities in companies like Palantir Technologies, focusing on its financial performance and the potential for continued growth in the AI market.
- As part of a well-rounded investment strategy, individuals or institutions looking to invest in the technology sector could consider Palantir Technologies due to its impressive financial track record, position in the S&P 500 and Nasdaq-100, and potential for long-term growth in AI applications, which requires substantial financial resources for R&D and expansion.
