£20,000 invested in growth stock Palantir at the start of 2023 is now worth…

This skyrocketing artificial intelligence growth stock has made investors an incredible amount of money over the past two years!

| More on:

Image source: Getty Images

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

Shares of Palantir Technologies (NASDAQ: PLTR) exploded 27% higher today (4 February). This follows the software company’s fourth-quarter earnings, which once again crushed Wall Street’s estimates.

Incredibly, the share price is now up 1,557% since the start of 2023! As I write, this means a £20k investment made inside a Stocks and Shares ISA back then would have mushroomed into roughly £332k (discounting currency moves).

That even leaves fellow AI stock Nvidia in the dust — it’s up ‘just’ 700% in this period.

Unfortunately, I’ve never owned the stock, despite considering it a handful of times since it went public in 2020. Should I now rectify this costly oversight? Let’s take a look at the earnings.

Palantir scores a hat-trick

For the fourth quarter, Palantir reported that revenue grew 36% year on year to $828m. This was better than the $776m that analysts were expecting (beat number one).

Next, the company’s adjusted earnings per share (EPS) climbed 75% to $0.14. Again, this was higher than Wall Street was anticipating ($0.11). So that was beat number two.

Finally, management offered better-than-expected guidance for 2025. It sees full-year revenue of $3.75bn (31% growth), higher than the $3.52bn that was previously expected.

What we have here then is a big double beat (on the top and bottom lines) and a guidance raise. Palantir’s revenue continues to accelerate!

Why is this happening?

The thing that’s fuelling all this growth is the company’s Artificial Intelligence Platform (AIP). This is helping organisations and enterprises harness AI to analyse vast amounts of data, automate complex tasks, and maker smarter decisions. It can uncover patterns and forecast future trends in real time. 

The numbers speak for themselves. US commercial revenue in the quarter rocketed 64% to $214m, while US government revenue jumped 45%. Its customer count grew 43% as it closed 129 deals worth at least $1m, 58 deals of at least $5m, and 32 deals worth no less than $10m!

Eccentric CEO Alex Karp is always worth quoting. In Palantir’s letter to shareholders, he said: “We have the products and reach of an established incumbent and the speed, growth, and agility of an insurgent startup. It is that most lethal of combinations.” 

In Q3, he said that a “juggernaut is emerging“. In Q4, the CEO confirmed that the “software juggernaut has indeed emerged“.  The juggernaut, of course, being Palantir.

In many ways, Karp reminds me of David Goggins, the former Navy SEAL turned motivational speaker. If I want motivation to get up on a cold morning to go for a run, or finish that last mile, I could put on one of his rousing YouTube speeches.

Likewise, if I ever doubt the AI revolution has legs, I can tune into Karp’s quarterly commentary on AI. Reassuringly, he says: “We are still in the earliest stages, the beginning of the first act, of a revolution that will play out over years and decades.”

Insane valuation

Make no mistake, these numbers are mightily impressive. However, I’m still left with the impression that this high-quality stock is grossly overvalued. Based on the 2025 forecast, it’s now trading at a price-to-sales (P/S) ratio of around 64.

In my experience, it’s dangerous to invest at this multiple. So I think investors considering the stock should tread carefully.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Ben McPoland has no position in any of the shares mentioned. The Motley Fool UK has recommended Nvidia. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

More on Investing Articles

Investing Articles

Would Warren Buffett buy BP shares, as oil excitement grows?

Warren Buffett is a big investor in the oil business, and BP's performance has been attracting investor attention in results…

Read more »

Cropped shot of an affectionate young couple posing with a bunch of flowers in their kitchen on their anniversary
Investing Articles

Here’s how long-term loyalty to UK shares can lead to dazzling returns!

The most successful UK and US share investors buy shares to hold for the long term, as this report shows.

Read more »

Investing Articles

NatWest has just smashed brokers’ dividend forecasts!

After NatWest delivered a Valentine’s Day surprise to investors, our writer thinks the experts may have to raise their dividend…

Read more »

Investing Articles

The NatWest share price slips in early trading despite positive FY 2024 results. What’s the deal?

The NatWest share price is down slightly this morning after the bank released its final results for 2024. Our writer…

Read more »

Young Asian man drinking coffee at home and looking at his phone
Investing Articles

My Legal & General shares have climbed just 7% — so how come I’m sitting on a 20% gain?

Harvey Jones' trading account is showing only a modest return on his Legal & General Shares, but on drilling down…

Read more »

Investing Articles

Prediction: the BP share price could rise in 2025 (or it might fall!)

Following this week’s release of the energy giant’s 2024 results, our writer reviews the prospects for the BP (LSE:BP.) share…

Read more »

many happy international football fans watching tv
Investing Articles

What’s gone wrong with the FTSE 100’s ‘King of Trainers’?

Feeling the pain of a 28% drop in the JD Sports share price over the past three months, our writer…

Read more »

Investing Articles

Is it too late for investors to consider buying these outstanding FTSE 100 shares?

Stephen Wright wonders whether now's the time to consider buying shares in the FTSE 100’s outstanding companies, despite some high…

Read more »