Can Palantir stock become the next Nvidia?

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With its shares up 2,500% in the past five years, it’s perhaps not surprising that investors are looking to the future Nvidia (Nasdaq: NVDA). The company was the biggest winner Artificial Intelligence (AI) Prosperity and as a result became one of the largest companies in the world.

I was recently browsing a stock message board when I saw an investor asking which stock would be the next Nvidia. The response was overwhelming Palantir (NASDAQ:PLTR). The company has already had a strong 2024 and its stock has been among the biggest winners on Wall Street this year.

With that said, let’s dive into what it will take for Palantir stock to become the next Nvidia in the coming years. But first we need to decide what that actually means. Nvidia was trading at a split-adjusted price of about $5.30 about five years ago (December 6, 2019) and is trading at about $138 as of this writing, representing about 26 times earnings. The company’s market value is about $3.5 trillion as of this writing.

Palantir ended 2022 at $6.42 and was trading at around $72 on December 11. From this perspective, the stock would have to rise to around $165 to be considered the next Nvidia from a percentage gain perspective, which would represent another ~130% increase.

However, if we were to define the next Nvidia as the next $3.4 trillion stock, Palantir shares would have to rise 20 times. Since investors are likely interested in finding a stock that comes close to Nvidia’s returns over the next five years, we’ll see if Palantir can become one of the largest companies in the world in that time frame.

It is worth noting that Palantir’s market value is larger today ($165 billion) than Nvidia was at the end of 2019 ($144 billion).

Palantir is currently trading at what would be considered an astronomical valuation, with a futures contract Price to Sales (P/S) The ratio is about 48 times analyst estimates for next year. That’s for a company whose total revenue grew 30% last quarter.

PLTR PS Ratio Chart (Forward 1 Year).
PLTR PS ratio (forward 1y) Data by YCharts

That’s not a justified valuation given this growth, so there are certainly some investors who see the potential for Palantir’s growth to become parabolic in the coming years. After minimal revenue growth in its 2023 fiscal year ended in January, that’s exactly what Nvidia was able to do — experience parabolic revenue growth.

For fiscal year 2024, its revenue increased by 123%, while its revenue during the first nine months of this year increased by 135%. Palantir will need to see similar growth and for a longer period of time, because even though its market capitalization starts at a higher valuation, its projected 2024 sales (about $2.8 billion) are much lower than Nvidia’s 2019 sales ($10.9 billion).



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