Inclusion in the benchmark index is a big milestone for this 20-year-old company.
Today, Sept. 23, the S&P 500 index is welcoming a new stock that’s been flying high this year. This particular technology company has seen its shares rise more than 100%, and considering the company’s earnings performance so far and future prospects, it may have more room to run. You probably won’t be surprised when I say this company is a player in the area of artificial intelligence (AI), one of the highest-growth markets today.
AI, expected to become a $1 trillion market by the end of the decade, is fueling revenue growth at a wide variety of tech companies, from those offering AI to help companies become more efficient to those selling components or services for AI platforms. The new S&P company helps its clients use AI to save time and money, and therefore become more profitable over time and reach their goals. Let’s find out more about this exciting growth stock.
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A company powering the U.S. economy
As of the opening bell today, Palantir Technologies (PLTR 1.00%) will be part of the S&P 500. This is a big milestone, because it signals the company is one of those powering the U.S. economy. Investors recognize this, so some that before this moment may have hesitated to buy Palantir shares now could view the company with more confidence. The stock may also get a short-term boost as managers of funds tracking the S&P 500 buy it so that their funds can correctly replicate the performance of the benchmark.
Palantir has been appealing to investors — and in turn, makes a great addition to the S&P 500 — thanks to its track record of growth, a new wave of growth that’s just beginning, and its long-term prospects.
First, a look at the path so far. Palantir isn’t a new kid on the block. The company has been around for about 20 years, and for most of that time it was associated with government contracts. Palantir helps customers aggregate their data and use it to become more efficient and even to make game-changing decisions.
This has helped earnings progress over time. But the company’s growth really took off in recent times thanks to its focus on using artificial intelligence to fuel its work. Last year marked a big step forward for Palantir as the company launched its Artificial Intelligence Platform (AIP). This AI-driven system allows customers to rapidly harness the power of their data and go from zero to a significant use case in a matter of hours.
A booming commercial business
And so potential customers may see the power of AIP, Palantir holds bootcamps. These sessions fill up quickly and have helped drive tremendous growth for Palantir. And all of this has helped the company’s commercial business to explode. In fact, U.S. commercial growth now is surpassing that of revenue growth from government contracts.
In the most recent quarter, U.S. commercial revenue jumped 55%, while U.S. government revenue added 24%. And U.S. commercial customer count soared more than 80%, with remaining deal value advancing more than 100%. And considering the company now has just under 300 U.S. commercial customers, there’s still plenty of room for growth. Gains so far along with the company’s observations of “unrelenting” demand are reason to be optimistic about this.
On top of this, AIP still is relatively new, so we could imagine many more companies and organizations jumping on board in the coming months and years. All of this should translate into higher earnings down the road. And this is why, even considering the stock’s gain so far this year, there’s reason to be confident about growth potential.
Palantir probably won’t climb nonstop. Stocks generally don’t. But I wouldn’t be worried if the shares take a pause or dip at a certain point. Over the long term, Palantir has what it takes to deliver a win for investors who buy and hold, making it an excellent stock to buy now.
Adria Cimino 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.
