Is Palantir Shares Potential for Making You a Millionaire Retiree?
Rewritten Article:
Palantir Technologies' (PLTR) stock had an impressive run in 2024, shooting up an astonishing 340%. This surge was fueled by a surge in revenue growth and operating margin, with the company's AI platform gaining traction in both the federal government and its U.S. commercial sector.
The company's origins can be traced back to counterterrorism, serving the federal government following 9/11. Afterwards, it expanded its offerings to include AI in 2023, which further propelled its business. The AI boom also contributed to the stock's rise towards the end of the year, after a strong third-quarter earnings report and following the election, as investors anticipated increased defense spending.
Entering 2025, Palantir boasts significant momentum, with revenue growth accelerating for five consecutive quarters and operating margins improving for eight straight. The AI demand and its increasing utility in the commercial sector have aided in scaling up its business, thereby expanding its margins.
Palantir's Success Story
Palantir's unique background in counterterrorism and defense tech provides it with significant competitive advantages in the niche of data mining. The company typically competes against in-house solutions offered by potential customers. In its annual report, Palantir noted that organizations often attempt to develop their own data platforms before considering its offerings.
Moreover, Palantir's AI platform has significantly boosted its business with commercial customers, resulting in faster sales cycles. U.S. commercial revenue surged by 54% during the third quarter, reaching $179 million, making it a significant growth driver for the company.
Palantir also continues to innovate, developing new products such as a visual navigation AI that can guide autonomous drones in regions without GPS.
The Risks Facing Palantir
Palantir is a robust business, given its focus on defense tech and data mining and analytics. However, its growth rate may not be sufficient to justify its eye-popping valuation. In fact, Palantir now ranks among the most expensive stocks on the market based on its price-to-sales ratio of 72, which reflects extraordinarily high expectations.
Despite software stocks generally trading at high valuations, even fast-growing ones tend to trade at a price-to-sales ratio of 20 or less. This means that Palantir trades at an extraordinary premium compared to its high-growth peers.
Given that most of its business is government-related, it may be challenging for Palantir to significantly accelerate its growth beyond the 30% reported in the third quarter. Although it is linked to AI, its growth potential may not be as explosive as that of a stock like Nvidia.
Will Palantir Make You a Millionaire?
Palantir presents long-term investment possibilities, but at its current valuation, investors should exercise caution with the stock. The valuation is likely to adjust, either through a stock price drop or the business growing into the valuation multiple. At that point, the risk-reward equation will be more favorable for Palantir.
Following its extraordinary surge in 2024, Palantir's stock shouldn't surprise anyone if it's due for a breather.
In light of Palantir's financial success, investors might be interested in allocating their finance resources to further invest in the company. Palantir's robust revenue growth and improved operating margins have made it an attractive option for those looking for high-yielding investments.
