Prediction: Palantir Stock Will Soar Over the Next 10 Years. Here's 1 Reason Why.
Key Points
Palantir has one of the most growth-dependent valuations of any major tech company.
While the stock is risky, the company's defense-AI strengths could help support continued valuation gains.
With relations between the U.S. and China looking shaky, Palantir's services could continue to see strong demand.
- 10 stocks we like better than Palantir Technologies ›
Palantir Technologies (NASDAQ: PLTR) has been one of the stock market's biggest winners in recent years. The company's share price is up more than 149% across this year's trading alone, and it has surged more than 1,620% over the last five years. The gains have been heavily driven by strong sales and earnings growth connected to the company's artificial intelligence (AI) software for the public and private sectors.
With these gains, the stock's valuation multiples have been pushed up to dizzying levels. The company now has a market capitalization of roughly $446 billion and is valued at about 137 times sales and roughly 217 times expected earnings.
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Despite Palantir's incredibly growth-dependent valuation multiples, there are potentially multiple catalysts on the horizon that could help the stock continue to rise -- and one in particular that suggests that it may not be as risky as it seems for long-term investors.
Image source: Getty Images.
Government AI credentials offer growth potential and defensive characteristics
The company has solidified itself as a leading provider of AI software for multiple branches of the U.S. military and other governmental agencies. The long-term outlook for these types of services is promising, and demand might be accelerating in the face of some of the biggest potential sources of geopolitical disruption, which could create valuation pressures across the broader stock market.
Palantir's valuation has already seen huge bullish momentum in conjunction with expectations that defense AI software will become increasingly important, and that could help to push the company's valuation far higher over the long term.
The U.S. and China appear to be making some meaningful progress on negotiations that could de-escalate trade war tensions, but there's a real risk that relations between the two world powers could continue to deteriorate over the next decade.
Whether or not this plays out, the risk is that it will likely continue to support demand for companies with strong defense AI. And Palantir currently looks to be best in class in this software category.
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Keith Noonan 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.
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