Contemplating Purchasing Palantir Prior to December 23?
Palantir Technologies (PLTR taking a 6.25% leap) has charted numerous significant accomplishments this year. The company secured a place in the esteemed S&P 500 index in September, solidifying its status as one of the influential forces propelling today's economic landscape. In the most recent financial quarter, this 20-year-old venture even recorded its most substantial profit ever, following a series of quarters boasting double-digit revenue growth. Unsurprisingly, these achievements have sent the stock price soaring, setting Palantir on track for a staggering 340% annual surge. With this performance, it tops the list of highest-performing stocks in the S&P 500 this year.
But why exactly is Palantir prospering? Last year, the company introduced its Artificial Intelligence Platform (AIP), and the market's demand – from government organizations and commercial clients – has been skyrocketing. Palantir's technology enables customers to amass their data and harness its potential more efficiently, often delivering results that can materially improve business outcomes. And as the year draws to a close, the thrill might not end for Palantir just yet.
Within the past week, the company received an invitation to become part of the Nasdaq 100. Officially, it will join the index on December 23rd. With this opportunity on the horizon, should you invest in the stock before this milestone moment? Let's explore.
Palantir's booming commercial customer base
To better understand Palantir and its progress, let's delve deeper into its evolution over the past few years. Initially a player mainly in the government sector, Palantir has been around for some time, but its commercial clientele has recently discovered the potential of its platforms. The release of AIP reinforced and solidified this trend.
Customers spanning from United Airlines to Wendy's have realized the value by adopting AIP to increase productivity and make data-driven decisions that can save them millions of dollars. US commercial revenues have experienced double-digit growth in recent quarters, with an impressive 54% margin in the most recent period. A glance at the company's commercial customer count four years ago and today demonstrates significantly increased demand. Once, it had only 14 US commercial clients, but now, it has more than 280.
At the same time, government clients have continued to contribute substantial growth, maintaining their double-digit gains. In the most recent quarter, US government revenues climbed 40%. This shows that both long-standing revenue sources (government contracts) and the newly-emerging growth driver (commercial clients) are bolstering Palantir's financial status. That's a favorable scenario.
Furthermore, Palantir reported that in the most recent quarter more than 100 deals over $1 million were finalized, highlighting the extent of customers' commitment to their work with the company.
Given its impressive earnings and recent stock performance, it's no wonder that Palantir has been welcomed into major indexes, and the Nasdaq 100 has extended an invitation for the software company to join. Now, let's consider whether investing in Palantir prior to its December 23rd entrance in the Nasdaq 100 is advantageous.
Influence of Nasdaq 100 index funds
One factor that could push share prices post-entry is the potential interest of Nasdaq 100 index funds. These investment vehicles must align with the index's composition, so they will be buying Palantir stocks. While this is undeniably positive, it probably won't cause the stock to skyrocket.
It's worth noting that a long-term investment strategy typically yields better returns than attempting to generate profits through short-term market fluctuations. This means approaching Palantir prior to its December 23rd entrance in the Nasdaq 100 might not be crucial.
Now, the question remains: Is Palantir a worthwhile investment? The sole potential disadvantage of Palantir today is its valuation, with a forward P/E ratio of 200. This might seem substantial, but if we examine the company's earnings growth rate (and do so by checking its forward PEG ratio), the situation might appear more promising. A company may be deemed overvalued when its PEG ratio surpasses 1.0. However, Palantir's PEG ratio is only 0.6, suggesting that even with its enormous gains, it may still represent a strong growth investment option for interested investors.
Considering Palantir's impressive earnings and growth, investing money in its stocks could be a lucrative finance decision. With the upcoming entry into the Nasdaq 100, the company might attract interest from index funds, potentially boosting its stock price further. However, some investors might be wary of Palantir's high forward P/E ratio of 200. However, its low PEG ratio of 0.6 suggests that its growth potential might outweigh the perceived overvaluation. Therefore, investing in Palantir might still be considered a sound finance strategy for those seeking growth-oriented stocks.
