If there were a contest for 2024’s standout performer in the stock market, one company would undoubtedly claim the top prize. The excitement around artificial intelligence and its practical applications has thrust the software company Palantir Technologies into the spotlight. It’s been nothing short of a record-breaking year for Palantir since it made its debut on the stock exchange in 2020. The company’s shares have skyrocketed by 350% this year, marking a remarkable achievement.
Not only has Palantir’s stock soared, but the company has also achieved significant milestones. In September, it secured a spot in the prestigious S&P 500, and just this month, it joined the selective Nasdaq-100 index. This year-to-date gain is the highest among current S&P 500 members, with Vistra Corp. trailing behind with a 263% increase. However, on Monday, shares dipped by 2%, pulling the broader market down as investors decided to cash in on this year’s big winners.
Palantir’s reputation for data software and analytics has been growing since its inception in 2003, securing crucial government and defense contracts along the way. This month, the company announced an extension of its AI contract with the U.S. Army, a deal worth up to $619 million. Additionally, Red Cat Holdings, known for its drones, revealed a new partnership with Palantir. Many see Palantir’s phenomenal year as just the beginning for the Denver-based firm.
Last month, Bank of America analyst Mariana Perez Mora described Palantir’s venture into government and commercial markets as being in the “early innings.” She sees the company, led by CEO Alex Karp, as spearheading a “modern Knudsen movement,” drawing parallels to Bill Knudsen, an automotive pioneer famous for ramping up aircraft production, crucial to the U.S.’s success in World War II. “Palantir has shown they can digitize everything from enterprise operations to military applications,” she noted. “In a world where efficiency, creativity, safety, and speed are paramount, Palantir stands out as a key player in this new era.”
Despite Palantir’s impressive trajectory, some skeptics remain. Over half of Wall Street analysts advise holding the stock, with about a third suggesting selling or underweighting it, as per FactSet. Morgan Stanley analyst Keith Weiss downgraded the stock from underweight and retracted his price target in November, saying the firm is re-evaluating its position. Although Palantir is emerging as a preferred platform in the current AI evolution, he feels the risk-reward ratio isn’t favorable.
Jefferies analyst Brent Thill, who recently downgraded Palantir to an underperform rating, pointed to an “unsustainable valuation” at 38 times the expected 2025 revenues. “Palantir won’t have easy comparisons moving into the fourth quarter and calendar year 2025,” he remarked. “We anticipate more challenges in accelerating growth from here on.”
