Do you have some cash you'd like to put to work but you're not sure where to invest it?
At the moment, $50 is more than enough to buy shares of two high-profile growth stocks that have beaten the market by a mile this year.
Data analysis specialist, Palantir Technologies (PLTR 3.73%) is up by about 175% this year, and UiPath, (PATH 0.26%) a robotic process automation company has gained about 90%.
Image source: Getty Images.
Just because they've already risen sharply doesn't necessarily mean they can't keep climbing. That said, it's probably a good idea to look at the road ahead of these two before taking any unnecessary risks with your savings.
Palantir Technologies
In a nutshell, Palantir helps organizations analyze data from multiple sources that traditionally don't communicate with each other. Its most famous examples involve combining CIA and FBI databases with publicly available transportation department data to thwart terrorist activity.
Until recently, potential investors held back from investing in Palantir because of a lack of private-sector clients, but that was short-sighted. Commercial revenue shot 23% higher year over year in the third quarter and drove the company to its fourth consecutive quarter of profitability according to generally accepted accounting principles (GAAP).
Palantir recently launched a new artificial-intelligence platform that its clients can use to leverage the power of large language models, such as GPT-4 from OpenAI. With many companies still scrambling to implement AI-related workflow solutions, investors can look forward to rapid growth from its new platform.
While Palantir is growing quickly, investors should know that it's trading for more than 71 times forward-looking earnings estimates. It could deliver market-beating gains, but any sign of a slowdown over the next several years could lead to a market thrashing.
Signs of a slowdown could be around the corner. Palantir stock recently fell hard in response to signs that the U.S. Army might not renew a contract originally worth $458 million.
If it turns out that Palantir has no trouble retaining clients despite the high prices it charges, this stock could soar again in 2024. That said, investors should steer clear unless they have a high tolerance for risk.
UiPath
UiPath is a leader in the growing market for robotic process automation (RPA) tools. Enterprise-level clients use its software to automate repetitive tasks such as data entry, or invoice processing.
UiPath isn't alone in the RPA space, but it's quickly carved out a strong lead. According to Gartner, its share of the RPA market has expanded from 1.5% in 2016 to an industry-leading 36% at the end of 2022.
UiPath's share of the burgeoning RPA market is more than its top three competitors combined, including Microsoft. Despite being the world's largest provider of business software, Microsoft's share of the RPA market was just 3.3% in Gartner's latest survey.
Companies eager to accomplish more with fewer employees on their payroll spent $2.3 billion on RPA solutions last year, and this figure is expected to climb by 39.9% annually through 2030.
After climbing around 90% this year, shares of UiPath are trading for around 51 times forward-looking earnings estimates. That's a more reasonable valuation than Palantir's, but there are still several years of strong growth already baked into UiPath's price. I won't be surprised if the stock soars again in 2024, but I'm not in a hurry to add to my position at this nosebleed-inducing valuation, either.
