Palantir Technologies Outshines S&P 500 with Strong 2024 Performance

Palantir Technologies (NASDAQ: PLTR) emerged as the top performer in the S&P 500 (SNPINDEX: ^GSPC) for 2024. The company’s share price soared by 340%, fueled by strong demand for its artificial intelligence platform, which led to impressive financial results over the year.

The positive trend continues into 2025, with Palantir showing a year-to-date return of 57%, again making it the best performer in the S&P 500. This success stems partly from investors’ preference for software and services companies that stand to largely avoid tariffs.

Wall Street’s Valuation Perspective

Despite its recent successes, Wall Street suggests caution regarding the current valuation of Palantir. The median target price among 27 analysts following the stock is $96 per share, implying a potential 20% downside from its current share price of $120.

Palantir’s Leadership in Data Analytics

Palantir operates in a lucrative market exceeding $100 billion, developing data analytics software for both commercial and government sectors. Its primary products, Gotham and Foundry, allow customers to implement machine learning models on complex data, promoting insightful decision-making. The company’s AI platform, AIP, enhances these core solutions by supporting large language models.

The firm distinguishes itself as the only software provider capable of operationalizing AI effectively, transitioning capabilities from prototypes to practical applications. CEO Alex Karp emphasized this niche, stating, “We are the only company in America, the only relevant market, that will allow you to do useful things with large language models.”

During the last quarter, Palantir reported financial results that significantly exceeded expectations. The customer base grew by 43% to 711, and the average existing customer spent 20% more. Consequently, revenue increased by 36% to $828 million, marking six consecutive quarters of acceleration. Non-GAAP net income surged 75% to $0.14 per diluted share, positioning the company favorably for continued growth.

Forrester Research has recognized Palantir as a technology leader in the artificial intelligence and machine learning arenas, with AIP receiving higher scores than competitors like Alphabet (Google) and Microsoft. This recognition highlights the company’s potential within a large addressable market, as International Data Corp. projects AI platform sales will grow at 40% annually, reaching $153 billion by 2028.

Image source: Getty Images.

Looking Ahead: Analyst Expectations for 2025

Palantir is set to announce its first-quarter financial results after market close on May 5. Analysts anticipate strong performance, with the consensus forecasting a 36% revenue increase to $862 million and a 62% rise in adjusted earnings to $0.13 per diluted share.

However, given Palantir’s history of exceeding consensus earnings estimates by an average of 13% over the past six quarters, the anticipated results may have created high expectations. Failure to meet these could result in a sharp sell-off, especially considering the stock currently trades at over 100 times sales—a multiple rarely seen in the software industry.

Over the longer term, Wall Street forecasts earnings to increase by 35% in 2025, making the current valuation of 290 times earnings appear costly. This yields a price-to-earnings-to-growth (PEG) ratio above 8, indicating potential overvaluation, as traditionally a PEG above 2 or 3 is considered high.

Investment Considerations for Palantir Technologies

Before investing $1,000 in Palantir Technologies, it’s worth noting some key points:

Current insights from top analysts suggest that Palantir Technologies does not rank among the best stocks to buy at this moment. Therefore, potential investors might benefit from waiting for a more favorable entry point.

Also, keep in mind that while shares may see a rise following the earnings announcement, the risk-reward balance currently leans toward risk, suggesting more favorable opportunities may exist elsewhere.

The views and opinions expressed herein are those of the author and do not necessarily reflect those of Nasdaq, Inc.