Palantir Technologies (NASDAQ:PLTR) It was among the best performing stocks this year. The company’s strong results led to the stock being listed on the stock exchange Standard & Poor’s 500And now I moved to Nasdaq The stock exchange, as it could soon join the more exclusive Nasdaq 100 index.
Could this become another catalyst that pushes this high-powered AI stock higher?
Missing your morning scoop? Wake up with Breakfast news In your inbox every market day. Register for free »
At first glance, Palantir’s move from the NYSE to the Nasdaq may not seem like a big move since many of its higher growth stocks are on both exchanges.
But what has excited investors is the prospect of being added to the Nasdaq 100 index, which contains the largest non-financial stocks on the stock exchange. With many stocks in the Nasdaq 100 trading with a market capitalization of less than $100 billion, the entry of Palantir, which is worth more than $145 billion, is expected to be a devastating blow for it.
This is important because if it is included in the index, it means the stock is included in more exchange-traded funds and portfolios. All this buying can inevitably cause the stock’s value to rise. Being added to the index would also be a great sign of the tremendous success the data analytics company has achieved over the years, validating its efforts and strong growth.
As a technology and artificial intelligence leader, Palantir could also become more popular with anyone who may not be familiar with its business. It is difficult to imagine that many investors are not aware of one of the most important of these events Growth stocks On the market this year, but its presence on a well-known index could attract more attention to Palantir.
While more investors may be taking notice of Palantir, what many of them will also be paying close attention to is the stock’s sky-high valuation. With this massive market capitalization, the stock trades at 58 times the revenue it generated over the past 12 months and more than 320 times the earnings it generated. There’s no premium valuation multiple with Palantir that can help justify its current price.
It seems that many investors are willing to buy it just in the expectation that it will rise, just because it is a hot AI stock. It’s a speculative reason and probably one of the best examples of this The Greatest Fool Theory Effective now.
But attention can be both positive and negative. As Palantir crosses more investors’ radars and they notice its high valuation, their only move isn’t necessarily to buy the stock. They can also sell it short – and short interest in Palantir has been on the rise lately.
Short interest has declined in recent years as the company has made profits and accelerated its growth. But now, with its valuation soaring to outrageous levels, short selling is starting to rise again, and it wouldn’t be surprising to see more investors betting against Palantir in the near future.
By adding such a high-priced stock to the Nasdaq 100, the index becomes more expensive, which could turn off some investors.
So don’t assume that by gaining more visibility, Palantir will deliver proven gains to those who buy it today.
Although the company seems to be proving all the doubters wrong these days with its stock price surging, the danger is that anyone who buys the stock without considering its fundamentals could be left holding a very expensive bag.
Palantir’s business is doing well. There is no doubt about that. But when placed in the context of its earnings and revenue numbers, the valuation doesn’t make any sense at this stage.
And when that happens, you’re in risky territory because all it might take is one domino to fall — whether it’s in the tech sector or the world of artificial intelligence, or a disappointing earnings report from the company — and shares of this highly valued stock could collapse quickly. .
Before you buy shares in Palantir Technologies, consider the following:
the Motley Fool stock advisor The analyst team has just defined what they think it is Top 10 stocks Let investors buy it now… and Palantir Technologies wasn’t one of them. The 10 stocks that were discounted could deliver huge returns in the coming years.
Think when Nvidia I prepared this list on April 15, 2005… If you invested $1,000 at the time of our recommendation, You will have $847,211!*
Stock advisor It provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month. the Stock advisor The service has More than four times The return of the S&P 500 since 2002*.
*Stock Advisor returns as of November 25, 2024
David Jagielski He has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Palantir Technologies. The Motley Fool recommends NASDAQ. The Motley Fool has Disclosure policy.
Will Palantir Technologies’ move to the Nasdaq help the stock move higher? Originally published by The Motley Fool