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Up 162%, Is Palantir Stock Still a Buy?
This has been an excellent year for shareholders of Palantir Technologies (NYSE: PLTR). In less than 11 months, the company’s stock soared 162% based on AI optimism and rising geopolitical uncertainty, which could increase demand for its unique brand of military- and intelligence-focused data analytics software.
But does Palantir’s new valuation match its fundamentals? Let’s dig deeper to find out if the stock is still a long-term buy.
A unique spin on software as a service
Software-as-a-service (SaaS) companies are popular with investors because, if done properly, the business model can generate stable recurring revenue. Their economic moats can also become stronger over time as existing clients become used to their workflows and are less willing to switch to rival platforms.
Palantir’s SaaS business focuses on machine learning and big data analytics to help organizations process large amounts of information to uncover insights and efficiencies. It combined these technologies with the large language models (LLMs) behind platforms like ChatGPT to help its clients make real-time decisions.
It is far from the only company tackling data analytics and generative AI, but it is unique because of its focus on government, military, and law enforcement clients, which might use its software in ways that are too politically sensitive for the typical company.
Palantir is known for helping the U.S. government track down Osama bin Laden more than a decade ago. More recently, it took on a controversial contract with Immigration and Customs Enforcement to provide profiling tools during the Trump administration, despite a media backlash.
The company is also working on the U.S. Army’s Maven targeting system — a program Alphabet might have been pressured to abandon because of its controversial nature.
Palantir has a significant opportunity to expand its contracting business as the geopolitical situation becomes more tense. The company already has contracts with the armed forces of Ukraine and Israel.
Business momentum remains strong
Most of Palantir’s 2024 rally can be credited to growing geopolitical uncertainty and hype surrounding AI-related companies in general. That said, it also enjoys strong operational momentum: Second-quarter revenue jumped 27% year over year to $678 million, driven by demand for its data analytics software platforms.
Most of Palantir’s most recent growth isn’t coming from the government clients that made it famous. Now, the private sector is driving expansion, especially in the U.S., where commercial revenue rose 55% year over year to $159 million (around 23% of the total).
That booming commercial business suggests the controversies surrounding its government work aren’t hurting its reputation and might even give it more credibility.
That said, the company’s increasing reliance on private sector growth will force it to compete with well-capitalized rivals. These include the world’s biggest SaaS company, Microsoft, which enjoys more name recognition and a likely more-advanced AI business because of its part ownership of industry leader OpenAI, the maker of ChatGPT.
Palantir’s valuation is hard to justify
A good company isn’t always a good investment. And that’s why potential buyers should look closely at the business’ valuation when deciding whether or not to bet on the stock.
With a forward price-to-earnings ratio (P/E) of 100, calling Palantir “priced for perfection’ sounds like a misnomer. It towers over the S&P 500 average of 25 and even Microsoft, which trades for a forward P/E of 32. With this in mind, Palantir stock looks unlikely to maintain this market-beating rally, and current investors might want to take profits.
Don’t miss this second chance at a potentially lucrative opportunity
Ever feel like you missed the boat in buying the most successful stocks? Then you’ll want to hear this.
On rare occasions, our expert team of analysts issues a “Double Down” stock recommendation for companies that they think are about to pop. If you’re worried you’ve already missed your chance to invest, now is the best time to buy before it’s too late. And the numbers speak for themselves:
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Amazon: if you invested $1,000 when we doubled down in 2010, you’d have $21,285!*
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Apple: if you invested $1,000 when we doubled down in 2008, you’d have $44,456!*
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Netflix: if you invested $1,000 when we doubled down in 2004, you’d have $411,959!*
Right now, we’re issuing “Double Down” alerts for three incredible companies, and there may not be another chance like this anytime soon.
*Stock Advisor returns as of October 14, 2024
Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Will Ebiefung has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Alphabet, Microsoft, and Palantir Technologies. The Motley Fool recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.
Up 162%, Is Palantir Stock Still a Buy? was originally published by The Motley Fool
Sales of existing homes fell in September as house hunters remained on the fence about buying a home despite mortgage rates easing during the month.
Existing home sales slipped 1.0% from August’s tally to a seasonally adjusted annual rate of 3.84 million, the National Association of Realtors said Wednesday. That marked the lowest rate since October 2010. Economists polled by Bloomberg expected a pace of 3.88 million in September.
On a yearly basis, sales of previously owned homes were 3.5% lower in September. The median home price rose 3.0% from last September to $404,500, marking the 15th consecutive month of annual price increases.
“Home sales have been essentially stuck at around a 4 million-unit pace for the past 12 months,” NAR chief economist Lawrence Yun said in a press release.
There have been significant challenges that have weighed on sales activity, including a lack of inventory, escalating prices, and elevated mortgage rates. Last month, however, those factors turned around.
The Federal Reserve cut its benchmark rate by half a percentage point in September. While the central bank doesn’t set mortgage rates, its actions influence their direction of movement.
Mortgage rates hit the lowest level since February 2023 ahead of the Fed decision to ease, while listing inventory picked up.
But overall, that hasn’t been enough to entice buyers.
“Some consumers are hesitating about moving forward with a major expenditure like purchasing a home before the upcoming election,” Yun said.
Tesla (TSLA) reported mixed third quarter results after the bell on Wednesday, but the stock jumped in after-hours trading as investors cheered the earnings beat, higher gross margins, and news that Tesla’s cheaper EV is on track for production next year.
For the quarter, Tesla reported revenue of $25.18 billion vs. $25.4 billion per Bloomberg consensus, higher than the $25.05 billion it reported in Q2 and also topping the $23.40 billion Tesla reported a year ago. Tesla posted adjusted EPS of $0.72 vs $0.60 expected, on adjusted net income of $2.5 billion and free cash flow of $2.9 billion.
The closely watched gross margin figure came in at 19.8%, much higher than the 16.8% expected.
Tesla shares were up nearly 8% in after hours trade.
“We delivered strong results in Q3 with growth in vehicle deliveries both sequentially and year-on-year, resulting in record third-quarter volumes,” the company said in its earnings deck. “Preparations remain underway for our offering of new vehicles — including more affordable models — which we will begin launching in the first half of 2025.”
Earlier this month, Tesla (TSLA) announced third quarter deliveries that slightly missed expectations, sending the stock lower.
Tesla said it delivered 462,890 vehicles in Q3, up 6.4% quarter over quarter, to mark the first quarter of delivery growth this year. The numbers also came in ahead of the 435,059 EVs the company delivered in the year-ago period. But Wall Street had expected Tesla to deliver closer to 463,897, according to Bloomberg.
“Refreshed Model 3 ramp continued successfully in Q3 with higher total production and lower cost of goods sold quarter-over-quarter. Cybertruck production increased sequentially and achieved a positive gross margin for the first time,” Tesla said in its report.
Tesla said it expects vehicle deliveries to achieve “slight growth” in 2024.
Ahead of Tesla’s Q3 disclosure, shares were down approximately 11% since Tesla revealed its robotaxi, dubbed the Cybercab, at its showy “We, Robot” event from the Warner Bros. studio lot in Burbank, Calif., on Oct. 10.
The debut and release of a cheaper EV is what many analysts and industry watchers believe will spur the next leg higher of EV sales, as even CEO Elon Musk has said before. During its Q2 report, Tesla and Musk said the company remains on track for the production of new vehicles, likely including a cheaper EV, in the first half of next year.
Investors and analysts were left wanting more details from Tesla’s “We, Robot” event on the Cybercab itself and detailed testing plans, along with questions about the development of Tesla’s sub-$30,000 EV, dubbed the Model 2.
Transak disclosed a data breach affecting over 92,000 users after a phishing attack compromised an employee’s laptop.
CryptoCurrency
The Dow plummets more than 600 points and is on track for its worst day in more than a month
The Dow Jones Industrial Average and other major indexes suffered a steep decline Wednesday afternoon as the yield on the benchmark 10-year U.S. Treasury note continued its upward climb, reaching 4.23%—a level not seen since July.
In the afternoon, the Dow dropped 631 points, or 1.4%, heading for its worst day in over a month. Meanwhile, the tech-heavy Nasdaq and the S&P 500 declined by 2.2% and 1.4%, respectively. However, there was some relief for investors as oil prices eased, with West Texas Intermediate (WTI) futures trading around $70.65 per barrel.
The Federal Reserve’s Beige Book, released in the afternoon, reported that economic activity remained largely unchanged across the 12 Federal Reserve Districts, with the Southeast significantly impacted by a harsh storm season.
On Wednesday, all eyes are on Tesla (TSLA) as the company prepares to release its latest earnings report. Analysts expect earnings per share to be 60 cents, down from 66 cents a year ago but an improvement from 52 cents in the previous quarter, according to FactSet estimates. Revenue is projected to hit $25.4 billion, compared to $23.3 billion in the third quarter of 2023 and $25.5 billion in the preceding quarter.
Apart from Tesla, investors are closely monitoring earnings reports from other major corporations, including AT&T (T), Boeing (BA), and Coca-Cola (KO).
McDonald’s stock plunges over 5%
McDonald’s (MCD) shares took a sharp hit, falling over 5% after the Centers for Disease Control and Prevention (CDC) linked the chain’s Quarter Pounder burgers to an E. coli outbreak. The outbreak has led to 10 hospitalizations and one death, driving a significant decline in McDonald’s stock during the afternoon trading session.
As of now, 49 cases have been reported across 10 states between Sept. 27 and Oct. 11, with a majority of illnesses occurring in Colorado, Nebraska, Utah, and Wyoming. The CDC noted that most of those affected had eaten a Quarter Pounder. Investigators are working swiftly to identify the contaminated ingredient.
Spirit Airlines stock soars 30%
After a failed attempt at merging with JetBlue (JBLU-0.80%), ultra-low-cost carrier Spirit Airlines (SAVE+28.01%) is reportedly turning back to a familiar partner. The Wall Street Journal (NWSA-0.34%), citing people familiar with the matter, reports that Spirit and Frontier Airlines (ULCC+3.05%) are in early talks over a potential merger. The news sent Spirit’s stock soaring nearly 30% on Wednesday.
–Francisco Velasquez and Rocio Fabbro contributed to the article
The semi-autonomous region of Tanzania is taking advantage of a sandbox regulatory framework adopted in July.
Bitcoin’s correction ignited selling in altcoins, which are slipping below critical support levels.
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