Palantir Technologies, trading under the ticker symbol PLTR, experienced a significant rise in its stock price on Monday, increasing by as much as 7.1% before settling at a 5% gain as of 2:03 p.m. ET. The notable increase was largely attributed to the company’s addition to an exclusive group of stocks.
Palantir has been included in the S&P 100, a prestigious subgroup of the broader S&P 500 index, which comprises the 100 largest companies within the index. The inclusion was aligned with the quarterly rebalancing of the indices. While joining the S&P 100 may seem minor, it could attract attention from hedge funds and institutional investors, thereby increasing demand for the stock. Additionally, exchange-traded funds that track this index will need to purchase shares of Palantir to maintain alignment with the index components.
Despite the potential for a short-term boost in stock price, often referred to as the “index effect,” any such impact generally lessens over time as investors resume focusing on fundamental factors such as revenue growth and profitability.
Palantir has been showing strong financial performance, with fourth-quarter revenue reaching $828 million, representing a 36% increase year over year. Adjusted earnings per share (EPS) also saw a significant rise, increasing by 75% to $0.14. This growth was driven by a surge in customer numbers and heightened demand for its Artificial Intelligence Platform, which aids businesses in making data-driven decisions using company-specific data.
However, the valuation of Palantir remains high, trading at 171 times forward earnings and 47 times forward sales, indicating that the stock is not inexpensive. Nonetheless, after the recent decrease in its stock price, Palantir’s forward price/earnings-to-growth (PEG) ratio has fallen to 0.9, which is generally considered fair valuation territory when below 1.
Taking these factors into account, it might be an opportune time for investors to consider looking into Palantir, given its recent price adjustments and growth potential.
The article also included disclosures noting that Danny Vena holds positions in Palantir Technologies, and The Motley Fool also has positions and recommendations concerning Palantir Technologies, as per their disclosure policy.
