Developments in the artificial intelligence (AI) sector have generated a lot of headlines over the past couple of years. The abilities of AI systems to create original content, automate processes, and increase productivity have businesses of all stripes eager to secure a part of the resulting windfall.
One company that’s well positioned to benefit from this trend is Palantir Technologies (NASDAQ: PLTR). It has decades of experience creating novel AI solutions, which came in handy when the generative AI trend went mainstream early in 2023. That secular tailwind has been extremely profitable for the company and its shareholders. The stock is up 333% so far this year and up 1,060% since the start of 2023, with its gains driven by robust results and an expanding opportunity.
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Positive developments for Palantir were so plentiful over the past week, it’s likely that some investors didn’t catch all the announcements. So here are four things you may have missed this week.
Image source: Getty Images.
To kick off the week, Nasdaq announced that Palantir will be added to the Nasdaq-100 index before the market opens on Dec. 23. This was widely expected after Palantir switched its listing from the New York Stock Exchange to the Nasdaq last month.
In a press release at the time, Palantir said, “The company expects to begin trading as a Nasdaq-listed company on November 26, 2024 and its common stock will continue to trade under the symbol “PLTR.” Upon transferring, Palantir anticipates meeting the eligibility requirements of the Nasdaq-100 Index.”
While the listing move was largely a cosmetic change, it could boost demand for Palantir stock, as mutual funds, institutional investors, and exchange-traded funds that track the index will have to buy it.
Palantir and Red Cat Holdings (NASDAQ: RCAT) announced a strategic partnership that will see Palantir’s Visual Navigation software integrated into Red Cat’s Black Widow drone. The company will also deploy Palantir’s Warp Speed manufacturing operating system.
“Equipped with Palantir’s visual navigation and artificial intelligence, the Black Widow will be among the most capable drones ever fielded by the Department of Defense, compact enough to fit in a rucksack,” said Red Cat CEO Jeff Thompson.
The terms of the contract weren’t provided.
Palantir announced an extension to its “long-standing partnership with the U.S. Army to deliver the Army Vantage capability in support of the ‘Army Data Platform’ (ADP).” The platform leverages data and Palantir’s AI to accelerate decision-making and improve combat readiness.
While the original contract was focused on personnel and combat readiness, the ADP system has become integral to the Army’s data-driven decision-making process. It supports soldiers in a growing list of use cases in areas such as logistics, risk management, recruiting, and financial management. This new agreement will expand the contract to include data across the entire Department of the Army.
The total value of the contract is $400 million, though it could potentially be increased to as much as $618 million over the next four years.
On the other side of the war and peace coin, Pray.com chose Palantir to help it with foreign language translations for the company’s faith-based content. The company noted the challenge of providing its offerings in a variety of languages, which has been cost-prohibitive due to the staffing requirements and the complexity of local idioms.
Using Palantir’s Ontology Software Development Kit, Pray.com was able to process audio and video transcripts and translations “across multiple languages,” achieving the “quality of native language speakers.” Perhaps equally important, it was able to achieve these results in a matter of minutes, rather than the days or weeks of human efforts its large volumes of translations had previously required.
Terms of the deal weren’t disclosed.
It’s important to point out that none of these developments are likely to move the needle for Palantir individually. Taken together, however, they bolster the company’s investment thesis.
Given Palantir’s rapid growth trajectory, commonly used valuation metrics like price-to-earnings and price-to-sales ratios fall short as gauges of its stock. However, applying the more appropriate forward price/earnings-to-growth (PEG) ratio — which considers Palantir’s robust growth rate — provides a multiple of 0.61. Generally speaking, the experts view any positive PEG ratio below 1 as signifying an undervalued stock.
For price-sensitive investors concerned about its current level, it might be worth buying Palantir using a dollar-cost averaging strategy — investing set amounts in the stock at regular intervals, regardless of what the price is doing at those times. Or, one could wait and hope the stock dips.
That said, given the company’s accelerating growth and the magnitude of the opportunity, I believe Palantir is a buy.
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Danny Vena has positions in Palantir Technologies. The Motley Fool has positions in and recommends Palantir Technologies. The Motley Fool recommends Nasdaq. The Motley Fool has a disclosure policy.
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