Palantir (PLTR +1.36%), the AI-powered data analytics company named after the all-seeing orbs from The Lord of the Rings, went public via a direct listing on Sept. 30, 2020. Its stock started trading at $10, but it's worth nearly $150 today. It also joined the S&P 500 in September 2024. Palantir attracted a stampede of bulls with its accelerating growth, soaring profits, and exposure to the booming AI market, but can it maintain that momentum over the next five years?
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How fast is Palantir growing?
Palantir operates two platforms: Gotham for its government clients and Foundry for its commercial clients. Both platforms aggregate data from disparate sources to help their clients spot trends and make faster data-driven decisions. Most U.S. government agencies use Gotham to plan their projects and missions, while large companies like Apple (AAPL 1.86%) and Walmart (WMT +1.32%) use Foundry to analyze their business trends.
NASDAQ: PLTR
Key Data Points
From 2020 to 2024, Palantir's revenue grew at a 27% CAGR. It turned profitable in 2023, and its net income more than doubled in 2024. Gotham gained more customers as domestic unrest and geopolitical conflicts sparked fresh government contracts, and Foundry grew rapidly as it gained more U.S. commercial customers. From 2024 to 2027, analysts expect Palantir's revenue and earnings per share (EPS) to grow at CAGRs of 45% and 84%, respectively.
The expansion of the AI market across multiple government sectors and industries should drive that acceleration. Its "Rule of 40" ratio (its revenue growth rate plus its adjusted operating margin) also hit the triple digits in its latest quarter. That closely watched percentage could continue to rise as its pricing power improves and economies of scale kick in. However, Palantir already trades at 186 times forward earnings, so a lot of that growth is already baked into its high-flying shares.
Where will its stock be in 5 years?
If Palantir matches analysts' estimates, continues to grow its EPS at a CAGR of 40% from 2027 to 2031, and trades at a more reasonable 50 times forward earnings by the beginning of the final year, its stock could rise 50% to $225 ($4.50 per share x 50) over the next five years.
That would be less impressive than its multibagger run over the past five years, but it could still outperform the S&P 500's average annual return of roughly 10% since its inception. That said, it's still a volatile stock that needs to gradually grow into its premium valuations.
