After a meteoric 331% rise in 2024, there’s likely a growing case for why data analytics firm Palantir (NASDAQ:PLTR) is worthy of being in the same league as the Magnificent Seven companies. Undoubtedly, it takes a heck of a lot more than one massive year to join an exclusive club of technological titans, all of which boast market caps well north of a $1 trillion market cap.
Even after quadrupling in a year, Palantir still boasts a relatively small $162.9 billion market cap at the time of writing. However, as we saw with Nvidia (NASDAQ:NVDA), a market cap can swell quickly on the back of a profound emerging technology like artificial intelligence (AI).
Key Points About This Article
- Palantir had a magnificent year, but is it too soon to consider the name a candidate for the Mag 7?
- It’ll be interesting to see how the firm fares in 2025. Its valuation is getting a tad too rich for some.
- If you’re looking for some stocks with huge potential, make sure to grab a free copy of our brand-new “The Next NVIDIA” report. It features a software stock we’re confident has 10X potentia
Indeed, AI isn’t just another amusing tech trend like blockchain, virtual reality, the cloud, or even smartphones; it may be better to view the technology as more of a broad wave of change that sparks a revolution across numerous industries. It’s these types of disruptive innovations that are capable of surprising to the upside in significant ways. When valuing such companies, it’s tough to pin down a fair multiple to pay, especially if the rate of fundamental improvement accelerates past expectations.
In any case, as long as exciting growth stories are backed by improving fundamentals and eventual plans to push into profitability, this AI rally may still have legs. And its biggest gainers, like Palantir, may still be in the middle innings of a lengthy ballgame, one that may very well go to overtime as occasional corrections cut the froth off the top of the market’s most overheated names every so often.
Palantir and the Mag 7 rocked as market wobbles on Fed talk.
With big AI winners (and the rest of the stock market) taking a big breather on Wednesday in response to the Fed meeting and re-adjusted expectations for rate policy in 2025, a Santa Claus correction may allow investors the chance to pick up magnificent AI innovators at a discount while most others grow distracted by monetary policy and fearful headlines overextended stock valuations.
Palantir stock shed close to 4% of its value on Wednesday, which is pretty much in line with the Nasdaq 100. As the massive AI winner continues inking contracts, I’d argue there’s a steady flow of new business that could push analysts to revise their price targets further in the new year, even if the rest of the stock market does plunge into a correction to start the new year.
The analytics titan recently earned its spot on the Nasdaq 100 and is starting to fall onto the radar of the rest of the retail crowd. While I think Palantir is on the road to magnificence and becoming a future contender for a spot in the Magnificent Seven, I can’t say I’m in a rush to chase the name in the latter half of the decade. The company needs time (let’s say a few years) to grow into its multiple.
If it can, I have no doubt CEO Alex Karp can lead the firm to greater magnificence. For now, it’s best to be patient with the stock. It’s hard to believe, but the stock will trade at more attractive valuations again. While it’ll probably never be a “cheap” stock, I do think the next market-wide correction could prove a timelier time to punch a ticket into the AI software play.
The bottom line
Baird analysts William Power and Yanni Samoilis recently started PLTR stock with a neutral (the equivalent of hold) rating and a mild price target of $70.00 per share, which implies a slight downside from Wednesday’s closing price of $71 and change per share. In short, they like the company but are off-put by the momentum behind the stock and the valuation. You can’t fault them for being cautious with the name after a historic year.
At 67.6 times price-to-sales (P/S), PLTR must show some positive surprises to justify its price tag. Otherwise, a pullback could be in the cards in 2025, one that could make for a terrific long-term buying opportunity. In any case, I view Palantir as one of the road to magnificence, but it’s not quite there yet.
Thank you for reading! Have some feedback for us?
Contact the 24/7 Wall St. editorial team.
Latest from 24/7
Our expert who first called NVIDIA in 2009 is predicting 2025 will see a historic AI breakthrough.
You can follow him investing $500,000 of his own money on our top AI stocks for free.