Palantir (NYSE: PLTR) The stock made big gains again in Monday trading. The company’s stock price was up 11.7% as of 11:30 a.m. ET, according to data from S&P Global Market Intelligence.
Palantir shares rise on news that the company’s shares will be added to Standard & Poor’s 500 Companies included in the index must meet criteria for profitability, valuation, trading volume and other factors – and adding a company to the S&P 500 generally reflects that the company has performed well and seen its value increase.
There’s another big benefit to being added to a major index. ETFs that track the index will buy shares of the companies that are added in order to reflect the change in composition. In turn, this tends to create upward momentum for the companies’ shares. With Palantir set to become part of the S&P 500 before the market opens on September 23, data analytics and AI (artificial intelligenceThe stock is already benefiting from this dynamic.
Is Palantir stock a buy now?
Palantir has been operating at full steam lately. Revenue grew 27% year-over-year in the second quarter, Non-GAAP Adjusted earnings per share were up 80% year-over-year, and the company posted an adjusted free cash flow margin of 21%. The strong momentum looks set to continue in the near term.
While Palantir got its start offering national security analytics and other software services to government clients, the company has been rapidly growing its business in the private sector — and its AI platform (AIP) software suite has played a big role in that momentum. Last quarter, sales to commercial clients grew 33% year over year and accounted for 45% of total revenue. The fastest-growing tech business segment will soon become its largest, suggesting that its sales growth has the potential to soar beyond its already impressive levels.
Even better, Palantir’s public sector business has not slowed down. Sales to government clients increased 23% year-over-year in the second quarter, and are up 11% sequentially. With geopolitical uncertainty seemingly on the rise, the company may continue to see strong demand in this sector.
Palantir’s growth engine has never been stronger, and the stock looks like a worthy addition for risk-tolerant investors looking for long-term investments in AI. Of course, investors should be mindful of their own risk tolerance. Palantir, which is valued at about 95 times this year’s expected earnings, is trading at a valuation heavily dependent on growth and could face significant pressure if volatility hits the broader market.
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Keith Noonan The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a position in and recommends Palantir Technologies. The Motley Fool has Disclosure Policy.
Palantir Shares Rise Today, Heading to S&P 500 – Is It Time to Buy AI Stocks? Originally posted by The Motley Fool