Palantir Technologies (NYSE:PLTR) started as many companies do: Its founders couldn't find the right solution for their needs. In this case, they needed technology that allowed collaboration without sacrificing data security, which led them to build Palantir.

At its core, Palantir Technologies is a software company. It builds digital infrastructure to help organizations better manage their secure data. Its focus on data security has made it a key software provider for the U.S. government and large corporations.

Palantir has also begun leveraging its expertise in data by providing customers with artificial intelligence (AI) solutions to help them get the most from their data. The company launched its Palantir Artificial Intelligence Platform (AIP) in 2023. It has quickly become an AI leader, with unrelenting demand for its leading capabilities.

Palantir's AI-driven growth potential might have you wondering how to invest in its stock. Here's a step-by-step guide on how to buy stock in the data software company and some factors to consider before adding shares to your portfolio.

How to buy

How to buy Palantir Technologies stock

Investors considering buying Palantir Technologies stock will need to take a few steps before becoming shareholders. This four-step guide will show you how to add the data software company to your portfolio.

Step 1: Open a brokerage account

You'll want to open and fund a brokerage account before buying shares of any company. If you need to open one, here are some of the best-rated brokers and trading platforms. Take your time to research the brokers to find the best one for you.

Step 2: Figure out your budget

Before making your first trade, you'll need to determine a budget for how much money you want to invest. You'll then want to figure out how to allocate that money. The Motley Fool's investing philosophy recommends building a diversified portfolio of 25 or more stocks you plan to hold for at least five years.

You don't have to get there on the first day, though. For example, if you have $1,000 available to start investing, you might want to begin by allocating that money equally across at least 10 stocks and then grow from there.

Step 3: Do your research

It's essential to thoroughly research a company before buying its shares. You should learn about its competitors, its balance sheet, how it makes money, and other factors to make sure you have a solid grasp on whether the company can grow value for its shareholders over the long term. Continue reading to learn more about some crucial factors to consider before investing in Palantir stock.

Step 4: Place an order

Once you've opened and funded a brokerage account, set your investing budget, and researched the stock, it's time to buy shares. The process is relatively straightforward. Go to your brokerage account's order page and fill out all the relevant information, including:

  • The number of shares you want to buy or the amount you want to invest to purchase fractional shares.
  • The stock ticker (PLTR for Palantir Technologies).
  • Whether you want to place a limit order or a market order. (The Motley Fool recommends using a market order since it guarantees you buy shares immediately at the market price.)

Once you complete the order page, click to submit your trade and become a Palantir shareholder.

Stock Ticker

A shorthand code of letters representing a company's stock for trading purposes, displayed on financial platforms.

Should I invest?

Should I invest in Palantir Technologies?

Examining all the data and doing your due diligence is essential before buying shares of any company. This process might confirm your investment thesis or change your mind about buying shares.

Here are a few factors that could lead you to buy shares of Palantir:

  • You strongly believe Palantir's stock will outperform the S&P 500 over the next three to five years.
  • You're a buy-and-hold investor who plans to own Palantir shares for several years.
  • You believe Palantir's AI platform will continue to be a huge growth driver.
  • You think Palantir's profitability will continue improving.
  • You believe Palantir can grow into its rather lofty valuation.
  • You prefer to invest in cash-rich, debt-free companies generating growing free cash flow.
  • Investing in Palantir would help diversify your portfolio.
  • You like to invest in founder-led companies.
  • You don't need dividend income from your investment.

Buy-and-Hold Strategy

A strategy that entails buying stocks or other securities and not selling them for long periods of time, sometimes decades.

On the other hand, here are some things that might lead you away from buying its stock:

  • You're not exactly sure what Palantir does.
  • You're not convinced Palantir can deliver market-beating returns in the coming years.
  • You think AI is a fad.
  • You're a more value-focused investor and think Palantir trades at a very high valuation.
  • You already own several technology stocks.
  • Given the country's deficits and debt, you're concerned about Palantir's exposure to the U.S. government (more than 40% of its total revenue in the third quarter of 2024).
  • You're in or nearing retirement and need income-generating investments.

Profitability

Is Palantir Technologies profitable?

Crunching the data on a company's profitability is crucial to researching a stock. Historically, profit growth is a key driver of stock price returns over the long term. Here's a closer look at Palantir Technologies' profitability.

Palantir Technologies earnings are growing rapidly. The company's generally accepted accounting principles (GAAP) earnings doubled in the third quarter of 2024 to $0.06 per share ($144 million in GAAP net income).

Palantir is also generating growing free cash flow. It produced more than $1 billion in adjusted free cash flow over the trailing-12-month period ending in September 2024. That grew its cash balance to more than $4.6 billion at the end of the third quarter (including cash, equivalents, and short-term U.S. Treasury securities). That allowed the company to start returning cash to investors via a $1 billion share repurchase program.

The company believes its revenue, earnings, and cash flow will continue growing, driven by robust demand for its AIP. That growing profitability could help drive its share price higher in the future.

Dividends

Does Palantir Technologies pay a dividend?

Palantir Technologies had not yet started paying a dividend as of late 2024. While the data analytics company hadn't started making dividend payments, it had begun returning cash to shareholders.

The company's board authorized a $1 billion share repurchase program in mid-2023. Given that it has only recently started earning a profit and launched a share repurchase program, the company likely won't initiate a dividend anytime soon.

ETF options

ETFs with exposure to Palantir Technologies

Investors who are unsure whether they want to invest directly in Palantir stock can still gain some exposure to the data software company. An alternative strategy is to make a passive investment by purchasing a fund that holds its stock. One of the most common passive investment vehicles is an exchange-traded fund (ETF).

Exchange-Traded Fund (ETF)

An exchange-traded fund, or ETF, allows investors to buy many stocks or bonds at once.

According to ETF.com, 211 ETFs held more than 244.2 million shares of Palantir Technologies as of late 2024. The SPDR S&P 500 ETF Trust (SPY -0.52%) was the biggest holder, with more than 24.9 million shares. However, the fund had only a 0.3% allocation to Palantir, so it might not be the best way for investors to gain passive exposure to the data company.

On the other hand, the REX AI Equity Premium Income ETF (AIPI -0.1%) had the biggest allocation, at 12.1%. Palantir was the fund's top holding, making the ETF a potentially attractive alternative option for investors seeking exposure to the data software company.

Stock splits

Will Palantir Technologies stock split?

Palantir Technologies didn't have an upcoming stock split on the calendar as of late 2024. The data specialist had not completed a stock split since its direct public market listing in 2020.

Shares of Palantir surged in 2024, reaching around $80 towards the end of the year. That was their highest level since going public. If shares continue rising, Palantir might need to consider a stock split.

Related investing topics

The bottom line on Palantir Technologies

Palantir Technologies co-founder and CEO Alex Karp is extremely optimistic about the future. In the company's third-quarter 2024 earnings release, he stated: "We absolutely eviscerated this quarter, driven by unrelenting AI demand that won't slow down. This is a U.S.-driven AI revolution that has taken full hold. The world will be divided between AI haves and have-nots. At Palantir, we plan to power the winners."

There's a lot of competition in the AI space. However, Palantir has positioned itself as an early winner. That makes it a potentially compelling investment opportunity for those seeking exposure to the AI megatrend.

FAQ

Investing in Palantir Technologies FAQ

Is Palantir a good stock to invest in?

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According to Wall Street analysts who follow the company, Palantir had a consensus rating of "hold" as of December 2024. They had an average price target of $39.57 per share (almost double the stock price at the time).

However, that doesn't mean you should follow their advice and hold shares. Those who believe Palantir's AIP will be a major growth driver might still want to buy shares. Conversely, people needing dividend income or concerned about valuation might wish to sell and invest that money in another stock.

What is a fair price for Palantir stock?

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The consensus 12-month price target among analysts who cover Palantir was $39.57 per share as of December 2024. The highest price forecast was $75 per share, while the lowest was $11 per share. That compared to a stock price of around $75 a share at that time.

Is Palantir a public company?

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Palantir Technologies is a publicly traded company. It trades on the New York Stock Exchange (NYSE) under the stock ticker PLTR.

Does Palantir pay a dividend?

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Palantir did not pay dividends as of late 2024. However, the company had started returning cash to investors. Its board authorized a $1 billion share repurchase program in mid-2023.

Matt DiLallo has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Palantir Technologies. The Motley Fool has a disclosure policy.