Could Palantir Stock Make You a Millionaire?

Palantir (NYSE: PLTR) has emerged as one of the darlings of artificial intelligence (AI) scholarship.

The technology company is known for its complex data analytics platforms. It began after 9/11 by providing software to federal intelligence agencies that helped them sift through mountains of data and make connections that could help them prevent new terrorist attacks.

Today, it is considered a leader in AI software with the Palantir Artificial Intelligence Platform (AIP), which enables users to build AI applications to speed up workflows or assist in processes such as inventory management or procurement.

Palantir shares are up more than 400% since the start of 2023, becoming one of the best performing AI stocks since the launch of ChatGPT. That run was recently ended by news that the company will be added to the S&P 500.

Following the stock rally, investors may be wondering if it’s too late to buy Palantir. Could the AI ​​company still provide income from here that could make you a millionaire?

The Palantir Growth Story

Some AI stocks such as Nvidia they claimed successful growth, but Palantir’s emergence was slower. The company was founded in 2003 and went public in 2020. It is on track to earn $2.75 billion this year.

In the second quarter, its revenue rose 27% to $678.1 million, and the company is now very profitable, with an adjusted operating margin of 37% in the quarter, or a 16% GAAP margin accepted (GAAP). Profits rose because the company’s business model is highly scalable — its operating expenses rose just 7% in the quarter.

Historically, Palantir’s business has come largely from federal government contracts, but it is diversifying its customer base with strong growth in the commercial division. In the second quarter, its commercial revenue rose 33% to $307 million — 45% of Palantir’s total revenue — and the number of commercial customers grew 83% to 295.

Overall, its recent results have been virtually flawless, with steady growth, rising profitability, improved guidance and a diversified client base. Palantir’s performance is particularly impressive in an environment where software stocks have struggled, with many trading well below pandemic-era peaks.

CEO Alex Karp characterized the company’s growth as “driven by an unrelenting wave of customer demand for artificial intelligence systems that go beyond just performance and academic.”

The story continues

Can Palantir Make You a Millionaire?

Palantir’s stock price rally from its all-time low in late December 2022 has already helped some investors take significant steps toward millionaire status. While the business is firing on all cylinders, there are some legitimate concerns about its valuation.

The stock currently trades at a price-to-sales ratio of 82.6 and a trailing price-to-earnings ratio of 205, although given its growth expectations, that ratio should drop fairly quickly.

Other AI stocks, such as Nvidia, appear to have been hit for now as investors worry that cloud infrastructure companies are overspending on AI and that share prices have outpaced growth in their underlying businesses.

As a software company, Palantir does not face this concern. Demand for its products is separate from the rest of the generative AI sector, but slowing growth could raise similar concerns. Palantir risks being hit by headwinds from the broader economy as its customers and potential customers may pull back on spending on new technology.

Palantir now has a market cap of nearly $80 billion, so multibagger growth will be more difficult from here, but the company’s competitive advantages should ensure continued growth.

If you’re looking for AI stocks or growth stocks to drive your portfolio toward $1 million, then investing in Palantir makes sense. However, making this position part of a diversified portfolio with other AI stocks seems like a better course of action. Plus, opportunistically buying Palantir if it pulls back could offer nice rewards.

Overall, based on its recent results and stock performance, Palantir has earned a place in any AI-focused growth stock portfolio.

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Jeremy Bowman has no position in any of the listed stocks. The Motley Fool has positions in and recommends Nvidia and Palantir Technologies. The Motley Fool has a disclosure policy.

Could Palantir Stock Make You a Millionaire? was originally published by The Motley Fool