Palantir Technologies (NYSE:PLTR) has been a divisive stock since it went public via a direct listing in September 2020. The bulls were initially impressed by the data mining company’s robust growth, the tenacity of its government contracts, and the growth potential of its commercial operations. Its ability to merge data from different sources to help customers make smarter data-driven decisions also made it a promising player in the artificial intelligence (AI) market.
Palantir’s stock price has more than doubled from its opening price of $10, but remains nearly 50% below its all-time high. Revenue rose 41% in 2021, but grew only 24% in 2022 and 17% in 2023. That slowdown — which missed its own target of at least 30% growth through 2025 — made it an easy target for the bears as interest earners. rates rose. It attributes this slowdown mainly to choppy government spending and other macroeconomic headwinds.
Palantir’s revenue is stabilizing and profits are rising, but the company is still worth $46.6 billion, giving it a frothy valuation of 17 times this year’s sales.
There are two less valuable tech stocks — Zscaler (NASDAQ: ZS) And The Trade Bureau (NASDAQ: TTD) – which have the potential to eclipse Palantir’s current market cap in just two years.
1. Zscaler
Zscaler, which currently has a market capitalization of $26.5 billion, offers “zero trust” services, where everyone – including a company’s CEO – is treated as a potential threat. Unlike many other cybersecurity companies that install devices on-premises, Zscaler only offers its tools as a cloud-native service, which is stickier, cheaper, and easier to scale.
From fiscal 2020 to fiscal 2023 (which ended last July), revenues grew at a compound annual growth rate (CAGR) of 55% as companies rushed to improve their internal defenses. Like many other cloud-based cybersecurity companies, Zscaler faced a slowdown over the past year as macroeconomic headwinds made it harder to lock large customers into long-term contracts. But during his last conference call in February, CEO Jay Chaudhry said he is not experiencing “significant pressure” on his major deals, and that zero trust remains a “top priority” for many sectors.
Analysts expect Zscaler’s revenue to grow at a CAGR of 27% between fiscal 2023 and fiscal 2026 as it overcomes these near-term challenges. Assuming the stock is still 12.5 times trailing revenue by the end of fiscal 2026, the market cap could reach $41 billion. If it traded at a more generous 15 times revenue, it would be worth almost $50 billion.
Zscaler is not yet profitable under generally accepted accounting principles (GAAP), but it occupies a more defensible niche than Palantir, is growing faster, and still trades at lower valuations than the data mining company.
2. The Trading Desk
The $42.8 billion Trade Desk owns the world’s largest independent demand-side platform (DSP) for digital advertising. DSPs allow advertisers to automatically purchase ad space on a wide range of platforms, including desktop PCs, mobile devices and streaming video services. They sit at the other end of the supply chain as sell-side platforms (SSPs), which help publishers sell their own ad inventory.
Tech giants love Alphabet‘s Google and Metaplatforms bundle DSPs, SSPs and other advertising tools, but usually lock advertisers and publishers into their walled gardens. To break down these walls, many companies are turning to independent DSPs like The Trade Desk to reach the “open internet” of other websites, apps and streaming video services.
Trade Desk revenues grew at a CAGR of 33% from 2020 to 2023, even as the broader advertising market struggled with the pandemic, inflation, geopolitical conflict and rising interest rates. Most of that growth was driven by the rapid expansion of ad-supported streaming video platforms. Using proprietary data and AI-driven ad placements also helped its clients deal with this Apple‘s restrictions on third-party data on iOS devices.
Analysts expect The Trade Desk’s revenue to continue growing at a CAGR of 22% between 2023 and 2026. If sales are still 17.5 times larger by then, it would be worth more than $60 billion by the end of 2026. just as pricey as Palantir, but the ad tech leader is growing faster than the data mining company and has clearer competitive advantages.
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Randi Zuckerberg, former director of market development and spokeswoman for Facebook and sister of Mark Zuckerberg, CEO of Meta Platforms, is a member of The Motley Fool’s board of directors. Suzanne Frey, a director at Alphabet, is a member of The Motley Fool’s board of directors. Leo Sun has positions in Apple and Meta Platforms. The Motley Fool holds positions in and recommends Alphabet, Apple, Meta Platforms, Palantir Technologies, The Trade Desk, and Zscaler. The Motley Fool has a disclosure policy.
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