Palantir (NASDAQ: PLTR) has undoubtedly been one of the many best performing stocks of 2024. The analytics and instrument management platform for authorities, militias and good industry has soared 340% in twelve months and sports a market capitalization of $167 billion as of this writing.
Palantir shareholders have been bullish on the company’s performance in 2024 with full confidence, but investors are no doubt pondering the legend’s new twelve months and wondering: Can Palantir protect this momentum? It’s time to dig into the foundations of this fast-growing company and find out.
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Price momentum and industrial acceleration
The stunning returns these Palantir fans experienced in 2024 generally stem from accelerated growth. Industry delight transformed the precise momentum for the stock, as Palantir accelerated revenue growth for 5 straight quarters, which can be attributed to the reputation of its artificial intelligence (AI) analytics tools.
Industrial revenue in the US was up 54% twelve months over the twelve months in Q3 2024, surpassing a document of $179 million for the segment. As a fast-growing substitute in the private sector, this has been a central factor in Palantir stock’s recent performance.
Even so, its industrial public sector continues to grow as effectively, with US authorities revenue up 40% in the trailing twelve months to US$320 million. Here is Palantir’s biggest segment because the company bought its origin, which served the militia, intelligence services and other government agencies.
The company posted its weakest performance last quarter outside the US, where global authorities and industrial revenue rose 13% and 3%, respectively. Palantir has at times been poised to increase its overall revenue growth regardless of the challenges in Europe and the Middle East, and if this top trend continues in 2025, the stock will undoubtedly see growth. It’s hard to bet against this momentum pick, at least within the current time frame.
Evaluation is lower than effectively organized
With annual revenue of more than $2.5 billion, the increased ranking has allowed Palantir to generate good earnings. Last quarter, its GAAP (on Total Accepted Accounting Solutions) profit margin used to be 20%, while its operating margin was 16%, and no doubt these margin numbers will protect expansion over the next few years.
If the company maintains a 30% commission on revenue growth, it will have $10 billion in annual revenue by 2029. Assuming that its profit margin also reaches 30% during this period, you will receive about $3 billion in annual earnings for this AI and the instrument is huge.
As much as such a forecast for Palantir might just seem presumptively optimistic, its half-assed model already reflects investor expectations that are as optimistic as I’ve described above — most likely even more so.
With a market capitalization of $167 billion, the stock boasts a forward-to-earnings (P/E) ratio of greater than 60 based on its ability to generate $3 billion in annual profits within spending. Despite the fact that 5-12 months in advance more than one page is almost tripled S&P 500forward P/E ratio of 22 based on the next twelve months.
Looking at the valuation legend in yet another skill, the stock has a trailing model-to-sales (P/S) ratio of 68. The pandemic rally used to be the last time investors lifted growth stocks to such formidable valuations , and the search for those elevated prices proved to be a costly mistake for many investors. Palantir’s P/S ratio is undoubtedly one of many absolute best historyso the market’s expectations regarding its growth are equally exaggerated.
YCharts Facts.
Why the next twelve months doesn’t matter
No one knows exactly what Palantir stock will produce in 2025. Still, if the company continues to accelerate its revenue growth quarter after quarter, the stock could probably possibly add its own features in 2024.
Despite what you convey about Palantir’s momentum to achieve the timeframe, those familiar with finding and holding quality holdings for the long haul want to listen to the price they pay for the stock and a plan where fundamental in earnings and cash flow, that the company will realistically generate for shareholders in the next 5 years and in the past.
Right now, Palantir’s $167 billion market capitalization looks wildly out of line with what it would probably probably presumably kill on the right track, even in the most optimistic of scenarios. That’s why investors should always protect themselves from looking for Palantir stock in 2025.
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Brett Schafer has no region in any of the stocks mentioned. The Motley Fool has positions and recommends Palantir Applied Sciences. The Motley Fool has coverage with the disclosure.
The views and opinions expressed herein are those of the creator and producer and are no longer necessarily conveyed by Nasdaq, Inc.