Why Palantir Rallied Over 15% This Week

The company was added to the prestigious S&P 500 Index. Also, AI.

Billy Duberstein

Endowed with (or cursed by?) a love of learning, Billy had a difficult time choosing his ultimate path among liberal arts, math & science, arts and athletics. Inspired by Robert Hagstrom's "Investing: The Last Liberal Art," (as well as The Motley Fool!) he realized, what better career to parlay that interdisciplinary orientation than investing? During a brief stint in the entertainment industry as a writer and editor, Billy began investing for himself, and was soon hooked. After getting his MBA, Billy worked on both the sell side and buy side, before branching out as an independent investment advisor and portfolio manager at his firm Stone Oak Capital. He currently runs a concentrated, Buffett-style investment strategy for his clients, and loves writing for the Fool along the way.

Published September 13, 2024 10:07 am EDT

Shares of Palantir (NYSE: PLTR) rocketed 15.1% higher this week through Thursday trading, according to data from S&P Global Market Intelligence.

Palantir shot up Monday on news the stock would be added to the prestigious S&P 500 index. In addition, the company announced a five-year extension with oil and gas giant BP and hosted its fifth AIPCon, showing off the company’s AI platform.

A person uses and AI chat bot — Source: Getty Images

A big achievement

The S&P 500 only admits certain companies that meet several criteria, including positive earnings over the past four quarters, a market cap that’s greater than $8.2 billion, and a decently liquid stock.

It’s a prestigious honor for Palantir, and now means investors in S&P 500 index funds will be forced to purchase its shares. That’s potentially good news for shareholders, as the three S&P 500 index funds from State Street, Vanguard, and Blackrock are the largest exchange-traded funds in the world. The bulk of Palantir’s gains came on Monday after the news was announced Friday.

Palantir also announced a five-year extension of its current engagement with BP this week. BP had already been a customer since 2014, using Palantir’s “digital twin” simulation for its oil and gas operations. Now with Palantir’s year-old AIP platform, BP will incorporate large language models (LLMs) into its workflows for better decision-making.

Speaking of AIP, which is Palantir’s AI-powered software that harnesses LLMs for tangible business outcomes, Palantir held its fifth AIPCon on Thursday. AIPCon saw over 100 commercial AIP customers attend, with a handful giving presentations as to how these organizations are benefiting from AIP.

Palantir is firing on all cylinders, but priced for it

The S&P 500 inclusion is a testament to Palantir’s recent success. However, is the stock a buy now?

Palantir now trades at over 33 times sales and 82 times its estimated earnings for next year. So, while the company is seeing an AI-powered acceleration, there isn’t much margin of safety in buying the stock at these prices.