Shares of Palantir have gained almost 380% this year, and they could still rocket higher by the end of the year.
Artificial intelligence (AI) once again dominated investment themes during 2024. While 2023 was all about the “Magnificent Seven” stocks such as Nvidia, Microsoft, Apple, Amazon, Alphabet, Tesla, and Meta Platforms, 2024 was influenced even more by a few new players that are vying for equal status as big tech names.
In my eyes, no other upstart tech company has garnered anywhere near the attention that enterprise software platform Palantir Technologies (PLTR -0.29%) is getting this year. As of this writing, Palantir stock has gained 380% so far in 2024 — making it the highest-performing stock in the S&P 500 by far.
Right now, shares of Palantir trade around $82. Below, I’m going to break down Palantir’s meteoric rise and explain how the stock could very well continue climbing higher, perhaps even hitting $100 a share by the end of the year. But more important than the short-term potential of this stock, I’ll outline if now is the best time to invest in Palantir for the long term.
A jam-packed 2024 for Palantir has caused…
I’ll admit that Palantir has earned its moment in the spotlight. Just this year alone, the company struck a number of strategic partnerships with technology‘s most influential players — including Microsoft, Oracle, Amazon, Meta, and defense consulting firm Booz Allen Hamilton.
On top of that, the company earned inclusion into the S&P 500 and Nasdaq-100 indexes, an enviable milestone for any company.
Data by YCharts.
The launch of Palantir’s Artificial Intelligence Platform (AIP) software suite in April 2023 has been directly correlated with steadily accelerating revenue across both the private and public sectors, augmented by widening profit margins and a transition to consistently positive net income.
All told, 2024 was a milestone year for Palantir on several fronts — and as an investor myself, I’m incredibly pleased. Nevertheless, while I am bullish on the company’s long-term potential in the AI landscape, investors need to take a hard look at valuation metrics before doubling down on the stock.
Image source: Getty Images.
…a run-up for the ages in its stock price
The chart below illustrates Palantir’s share price over the course of 2024. What’s incredible is that for much of the year, shares held quite steady following a slight jump between January and February. It really wasn’t until the summer that Palantir stock started showing consistent increases. Furthermore, the stock really kicked into a new gear in early November — following an impressive third-quarter earnings report.
Data by YCharts.
While I do think Palantir stock deserves a premium over other AI software stocks, the valuation multiples below illustrate how out of hand things have become from an investment perspective.
Data source: Yahoo Finance.
Simply put, paying 170 times forward earnings for a company growing by 30% is disconnected from reality. Furthermore, a PEG ratio over 1 generally indicates that a stock is overvalued and that its price (market cap) is accelerating much faster than the expected growth in earnings per share over the next several years. Palantir’s PEG ratio is higher than 3, indicating a high degree of valuation expansion at the moment.
Just recently, financial news anchor Jim Cramer posted the following thought on X (formerly known as Twitter):
At this point it is pretty obvious that the buyers want to take Palantir to $100 by yearend and i think they have the firepower to do it.
— Jim Cramer (@jimcramer) December 20, 2024
While I tend to think of Jim Cramer as more of an entertainer, I have to admit that I agree with his analysis here.
The bottom line
Could Palantir reach $100 per share by the end of the year? Maybe. But as Cramer subtly implies, there are clearly a lot of eager retail investors and meme investors fueling the hype in Palantir right now. Shares have risen at an unprecedented pace — almost mimicking that of Nvidia over the last two years.
At the moment, I see Palantir as more of a momentum investment fueled by day traders. Although I do think the stock could make a move to $100 sooner than later, I also think it could sell off materially shortly thereafter — leaving many unsuspecting investors holding the bag at the worst possible time.
As a long-term investor, I’ll be on the lookout for more reasonable prices that align with the fundamentals of Palantir’s business.
John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool’s board of directors. Adam Spatacco has positions in Alphabet, Amazon, Apple, Meta Platforms, Microsoft, Nvidia, Palantir Technologies, and Tesla. The Motley Fool has positions in and recommends Alphabet, Amazon, Apple, Meta Platforms, Microsoft, Nvidia, Oracle, Palantir Technologies, and Tesla. The Motley Fool recommends Booz Allen Hamilton and 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.
