A number of high-flying growth stocks have come back down to earth following the recent market pullback. Let's look at two that investors can consider buying this year, especially if the market once again starts to head lower.
1. Palantir
Trading at a forward price-to-sales (P/S) multiple of 60, Palantir Technologies (PLTR 7.32%) will not be mistaken for a cheap stock. However, if the market rebound reverses course, it should be on your list to potentially buy.
The company has been seeing accelerating growth, as commercial customers embrace its Artificial Intelligence Platform (AIP). Instead of focusing on building out large language models (LLMs) like many in the space, it has turned its attention toward the application and workflow software layers of artificial intelligence (AI), essentially turning its platform into an AI operating system.
NASDAQ: PLTR
Key Data Points
Its purpose is to provide the logic and functionality so that AI can take the actions needed to complete tasks. It does this by connecting digital assets, such as data and models, with their real-world counterparts, such as physical assets or financial transactions. It then rigorously tests to make sure that these AI solutions will work properly in real-world situations.
The company has seen great success attracting prospective customers through its AI boot camps, where it helps them understand how they can apply AI to important uses in their businesses. It then helps develop initial functions and trains and on-boards users. This has led Palantir's number of commercial customers to soar, with a 43% year-over-year increase last quarter.
The big opportunity for the company, though, is taking these early customers from proof-of-concept work into production where its AI solutions are solving real-world problems. Meanwhile, once initial uses prove successful, it should also see strong growth by existing customers as they look toward Palantir to help solve new tasks.
This ultimately is a huge opportunity. If it can become the leading AI operating system solution, the sky is the limit for the stock over the long term.
In the near term, the company does face some uncertainly with the federal government looking to reduce the budget of the Department of Defense. The government, and in particular the defense department, is Palantir's largest customer, so the defense budget getting slashed by the Department of Government Efficiency (DOGE) creates some uncertainty.
However, its CEO has come out and said he is a fan of DOGE, and there is the possibility that the company could see solid increases in its federal government business given the efficiencies its AIP can provide.
Image source: Getty Images
2. Gitlab
Another stock with a lot of potential is Gitlab (GTLB 7.83%), which operates a DevSecOps (development, security, and operations) platform that helps developers securely create software. And it trades at a much more reasonable forward P/S multiple of just over 9 based on analyst estimates for 2025.
The company has been a consistently strong grower. In fact, it has increased revenue by between 29% and 33% each of the past six quarters. And this is a high gross margin business that generates solid free cash flow.
Gitlab's strong performance is being driven by both new customers and increased spending by existing customers. In 2024, it had robust dollar-based net revenue retention of 123%, which means existing customers spent 23% more with Gitlab compared to a year ago. The company said 75% of this came from seat expansion, where customers pay to have Gitlab solutions available to more of their developers.
NASDAQ: GTLB
Key Data Points
There had been some concern among analysts that the company would cannibalize itself and that AI-enabled software development tools would lead to less expansion in the number of seats. But with its steady results, these worries are starting to fade.
Analysts at Bank of America recently issued a bullish outlook on Gitlab, placing a $90 price target on the stock. They pointed to its strong gross margins, AI innovation, and strong customer increases as their reasons.
Gitlab has really been embracing AI and currently has three products involving the technology. Duo Pro can make suggestions to help developers write code. Duo Enterprise has about 15 features to help developers throughout the entire software development life cycle. And Duo Workflow, which will find and fix software bugs, is currently in beta testing.
Thus far, these AI tools have been gaining a lot of traction, with Duo growing quickly. Meanwhile, the company is also seeing strong results in its higher-tier platforms, Ultimate and Dedicated.
Gitlab should have a lot of continued growth ahead and currently trades at a reasonable valuation.
