The S&P500 (SNPINDEX: ^GSPC) rose from the very beginning of the year, confirming its presence in a bull market, reaching record high after record high. And today, the benchmark continues this momentum, now on track for annual gains of more than 27%. That follows last year’s 24% increase, marking two fantastic years for investors.
Technology companies have contributed significantly to the movement, as investors flocked to the winners in artificial intelligence (AI). With AI’s promise to revolutionize many industries, investors wanted to get in early and maximize their profits. And it just so happens that the best-performing company in this year’s S&P 500 is a company that launched a major AI-powered platform just a year ago.
Although this company has been around for about twenty years, growth has really taken off recently, with profits reaching records. This player has done so well that the S&P 500 invited him to join this year, and he became a member in September.
Let’s meet this company that’s on track for a 300% increase this year – and discover Wall Street’s surprising expectations for this player in 2025.
This specific company is not a developer of the components needed for AI to function, such as chips or servers. Instead, it uses AI to fuel an incredibly powerful platform that has been known for serving governments for years. This company’s software helps customers take all their data (which can be quite scattered and seemingly unrelated) and use it to make potentially game-changing decisions. From governments to hospitals, airlines and restaurant chains, customers are rushing to sign up for this system that can help them save time and money and excel in a variety of projects.
The best performing AI company behind this technology is Palantir Technologies (NASDAQ:PLTR)and demand from both government and commercial customers has driven double-digit revenue growth in recent quarters. What’s particularly exciting is Palantir’s growth in the number of commercial customers: from fourteen commercial customers in the US four years ago, Palantir has grown to approximately 300 today. And this may just be the beginning, as companies look to leverage AI to become more efficient and accelerate growth.
Deal value also looks positive, with Palantir signing more than 100 deals worth more than $1 million.
And to keep this growth going, Palantir came up with a brilliant idea: it introduces potential customers to its Artificial Intelligence Platform (AIP) through AIP bootcamps. These sessions allow them to go from zero to a potential use case in a matter of hours, so they can immediately see the impact AIP will have on their business. Palantir has said these bootcamps have driven revenue growth, and last quarter the company talked about how these turned into new deals. In fact, many clients’ bootcamps translated into seven-figure deals in less than two months.
So it’s no surprise that Palantir stock has taken off this year. But Wall Street says the stocks may have gone too far, too fast. The average analyst estimate is for a decline of more than 40% from this level over the next twelve months. The stock has become expensive and trades at a stunning forward earnings estimate of 185x. All this means that even as Palantir grows by leaps and bounds, Wall Street expects a decline in its stock price in 2025.
Does this mean you should avoid Palantir? Not necessarily. Yes, the stock looks expensive based on its forward price-to-earnings ratio. But it’s important to note that this metric generally takes into account expected profits in the coming year – and doesn’t take into account what Palantir’s earnings picture might look like in five or ten years.
Today, I still don’t consider Palantir the best stock for everyone; a value investor, for example, should look elsewhere. But long-term investors interested in growth companies that are in the early stages of their growth story should take another look at this top S&P 500 performer, despite its hefty valuation. Over time, investors could still win by investing in Palantir, thanks to the unstoppable momentum of the company’s commercial operations and AI-driven platform.
Consider the following before purchasing shares in Palantir Technologies:
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Adria Cimino has no positions in the stocks mentioned. The Motley Fool holds positions in and recommends Palantir Technologies. The Motley Fool has a disclosure policy.
Meet this year’s best-performing S&P 500 stocks. It’s new to the index and you won’t believe what Wall Street expects from it in 2025. was originally published by The Motley Fool
