Meet the Monster Stock That Continues to Crush the Market

Many of today's tech stocks -- including the Magnificent Seven that led last year's stock market gains -- have suffered in recent times. Even the most established of tech players such as Nvidia or Apple, for example, have seen their shares stumble. Why? Investors have worried that President Donald Trump's import tariff plan would hurt growth -- higher prices could result in lower spending by U.S. consumers and companies.

Yet, against this backdrop of uncertainty, one tech company in particular stands out. This software player has seen its shares soar 1,400% over the past three years, resulting in a valuation that many analysts have said isn't sustainable. For months, they've predicted the stock was set to pull back. But so far any declines haven't lasted. In fact, this supercharged growth stock has climbed 55% so far this year. Let's meet the monster stock that continues to crush the market.

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A red-hot player delivering double-digit growth

This red-hot player is Palantir Technologies (NASDAQ: PLTR), and its recent news shows us why investors are so excited about the stock. Yet again, Palantir reported quarterly double-digit revenue growth, solid profitability, and boosted guidance for the full year. But before we get to that, let's look at Palantir's path so far -- and how it rushed from investors' radar screens into their portfolios.

Palantir has been around for more than 20 years, and in its earlier days it mainly was known for serving the government with its data gathering and analyses platforms. The company, over this time period, built out its capabilities, then launched an initial public offering five years ago. Though the stock initially took off, it slumped and wallowed in the doldrums a few years later.

But Palantir's fortunes changed with the artificial intelligence (AI) boom and the launch two years ago of its AI-powered product, simply called its Artificial Intelligence Platform, or AIP. This system uses AI throughout the process of aggregating a customer's disparate data and helping that customer put it to work -- the results are often striking, changing the game for that particular user. AIP is helping customers save time and money, make better decisions, and develop new strategies and systems.

And to spur growth of this new system, Palantir launched bootcamps to offer customers an opportunity to test AIP and see how it could work for them. This has proven to be a fantastic strategy, and thanks to this, the quality of AIP, and the fact that the AI boom is going strong, Palantir's commercial revenue took off. So now, Palantir continues to see growth from its government customers, and commercial revenue is contributing significantly too. All of this, unfolding quarter after quarter, has stirred up investor excitement and helped the stock to skyrocket.

Deals worth at least $1 million

In the most recent quarter, the first quarter of its fiscal-year 2025, Palantir delivered a fresh dose of good news: The U.S. government and commercial businesses each reported a double-digit increase in revenue. Deal value also is climbing, with Palantir saying it closed 139 deals in the period that were worth at least $1 million. That's up from 104 deals of that value just two quarters ago.

Importantly, Palantir is balancing this growth with profitability, and this is reflected in its Rule of 40 score of 83%. At 40%, a software company is viewed as having a good growth/profit balance, so clearly Palantir is excelling in this area. Finally, Palantir finished off the report by lifting its total revenue, U.S. commercial revenue, adjusted income from operations and adjusted free cash flow guidance levels for the full year.

Now, let's consider stock price. This has been the sticking point for potential investors -- though Palantir's outlook is incredibly bright, the stock is trading at a very high valuation: 200x forward earnings estimates. And analysts continue to predict a decline is near. Wall Street's average price target calls for the stock to fall about 20% in the coming 12 months.

What does this mean for you as an investor? If you're a value investor, you probably won't want to pick up Palantir shares right now as they're not the right fit for a value strategy.

But if you're a growth investor and you aim to hold your investment for a number of years, you still may benefit from a Palantir buy today -- even at today's price. Though the stock could indeed stumble and go through a period of stagnation, this supercharged growth company has what it takes to power its share price higher over the long term.

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Adria Cimino has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Apple, Nvidia, and Palantir Technologies. The Motley Fool has a disclosure policy.