Palantir Soars While Investors Search for New Opportunities
As 2024 wraps up, Palantir (NASDAQ: PLTR) has emerged as a major stock market success, witnessing a remarkable rise.
With only one day left in the year, Palantir’s stock has skyrocketed by 349% in 2024.
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Palantir has enjoyed a stellar year, with accelerating revenue growth and expanding operating margins. The company gained entry to both the S&P 500 and the Nasdaq-100. Once focused mainly on government clients, Palantir now attracts commercial customers for artificial intelligence (AI) and other applications.
However, this success has also led to a significant increase in Palantir’s valuation. Following a slight retreat in its stock price, it now sits at a price-to-sales ratio of 72. In essence, it means that if profits matched sales, its shares would still be twice as costly as those of the S&P 500. This high valuation raises concerns, as any deceleration in growth could negatively impact the stock price.
For investors seeking alternatives, there are more favorable stocks to consider for the next five years. Below are two top picks.
Image source: Getty Images.
1. Axon Enterprise: A Promising Player in Law Enforcement Tech
Axon Enterprise (NASDAQ: AXON) has had a fantastic 2024, with a stock increase of 134% by December 30, benefiting from trends similar to those affecting Palantir.
This law enforcement technology company specializes in Taser stun guns, body cameras, and a cloud platform aiding police departments in managing evidence and records. Investors anticipate increased spending on law enforcement under the incoming Trump administration’s policies, which may position Axon for significant growth.
Following election results, the stock surged 4% and then continued to rise after a robust earnings report that exceeded expectations.
Currently valued at $46 billion, Axon is smaller than Palantir’s $175 billion market cap. Yet, Axon’s commitment to AI innovation, demonstrated by the creation of Axon AI in 2017, positions it for future success. This year, Axon launched Draft One, an AI-focused tool that streamlines report generation from body camera footage, enhancing efficiency for law enforcement.
While Axon’s price-to-sales ratio is 24.3, it remains considerably more affordable than Palantir’s. With strong growth prospects and potential for expanding profit margins, Axon seems well-positioned compared to Palantir, which may face valuation challenges. By 2030, Axon could outpace Palantir in market value.
2. MercadoLibre: The E-commerce Titan of Latin America
MercadoLibre (NASDAQ: MELI) is another strong contender, boasting a nearly 6,000% increase since its 2009 IPO and a consistent record of growth.
The company mirrored Amazon by establishing a base in direct e-commerce and subsequently diversifying into profitable sectors like digital payments, third-party marketplaces, and advertising, along with a delivery service, known as MercadoEnvios. They’ve also developed various financial services, including MercadoFondo for asset management and MercadoCredito for consumer lending.
MercadoLibre’s rapid growth and increasing profit margins demonstrate its robust competitive advantages despite the presence of formidable rivals such as Amazon and Sea Limited’s Shopee. Looking ahead, the company has ample opportunities to expand within core markets in Latin America, including Brazil, Mexico, and Argentina.
Currently valued at $87.3 billion, MercadoLibre could potentially overtake Palantir within five years, holding a price-to-sales ratio of just 5 and a price-to-earnings ratio of 61. Given a 35% revenue growth in Q3, the stock has significant growth potential if it maintains its upward trajectory.
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*Stock Advisor returns as of December 30, 2024
John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Jeremy Bowman has positions in Amazon, Axon Enterprise, and MercadoLibre. The Motley Fool has positions in and recommends Amazon, Axon Enterprise, MercadoLibre, Palantir Technologies, and Sea Limited. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are those of the author and do not necessarily reflect those of Nasdaq, Inc.
