3 Reasons Why Palantir Stock Keeps Going Up and Up

Core Viewpoint - Palantir has emerged as the best-performing stock in the S&P 500, demonstrating remarkable recovery and growth after a significant decline in 2022 [1][2]. Group 1: Stock Performance - Since reaching an all-time low of $5.92 per share in late 2022, Palantir's stock has surged, delivering a 340% increase last year and a 105% gain year to date, currently trading at approximately $154 [2]. - The stock's price-to-sales ratio stands at 120, nearly 40 times higher than the overall S&P 500 index, indicating a premium valuation despite ongoing growth [3]. Group 2: Business Improvements - Palantir has transitioned from a slow-growth, barely profitable company to a fast-growing, high-margin business, with U.S. revenue increasing by 55% year over year in the first quarter and commercial sector revenue up 71% [7][5]. - The company's Rule of 40 score, which combines revenue growth and operating margin, has risen to 83%, significantly exceeding the standard for investable software stocks [8]. Group 3: Government Contracts - The federal government remains Palantir's largest revenue source, with U.S. government revenue rising 45% to $373 million in the first quarter, constituting over 40% of total revenue [9]. - Support from the Trump administration is expected to bolster Palantir's growth, particularly with initiatives like the executive order for data sharing across agencies and the development of new surveillance platforms [10][11]. Group 4: Market Environment - The current market environment is characterized by a risk-on sentiment, with AI stocks like Palantir experiencing significant investor interest as the S&P 500 reaches new highs [12][13]. - Despite the positive outlook, the high valuation of Palantir makes it susceptible to market volatility, as evidenced by a 40% drop earlier this year [14][15].