Can Palantir Stock Be a Big Winner For Investors Again in 2025?

TradingKey - Any investor who had a stake in large cap Artificial Intelligence (AI) stocks in 2024 probably did pretty well. That was down to the fact that the theme powered the US stock market higher last year, with the S&P 500 Index ending the year up 23.3%.

The go-to stock market index in the US registered two consecutive annual double-digit percentage increases, after the S&P 500 Index’s 24.2% gain for 2023.

The best-performing stock in the whole of the S&P 500 Index last year was Palantir Technologies Inc (NASDAQ: PLTR). The big data analytics platform operator saw its shares soar by 340.5% in 2024 as investor optimism surrounding its AI story gathered momentum.

But can Palantir shareholders expect another lucrative year for its shares in 2025?

Data + AI + commercial = Growth story of 2024

Palantir is a company that has traditionally gotten the bulk of its revenue from government contracts, with the commercial side of its data-centric business more of an afterthought.

However, with the skyrocketing demand for data organisation and analysis, private companies are increasingly engaging with Palantir for help to crunch data. Indeed, during Palantir’s five most recent quarters revenue growth expanded by 30% or more.

That has been driven by a stronger top-line expansion on the commercial side of its business. For example, overall revenue expanded by 30% year-on-year to US$725.5 million for Palantir’s Q3 2024 period.

However, there was more robust growth from its US commercial business – one of its key growth drivers – where revenue rose 54% year-on-year to US$179 million. That easily outperformed overall revenue growth and also came in ahead of the 40% year-on-year revenue growth seen in its US government business.

Keeping up growth in 2025

In its most recent quarter, Palantir also reported record net income of US$144 million. Meanwhile, its GAAP earnings per share (EPS) increased by 100% year-on-year to US$0.06 for the period.

Clearly, expectations are high for Palantir heading into 2025 but that’s because the company has consistently posted “beat and raise” quarters in terms of earnings expectations and guidance, respectively. Now that the bar is getting higher, the market may be more willing to punish Palantir in 2025 if the company doesn’t continue on its current trajectory.

Tied to this is valuation, which is that Palantir shares aren’t exactly “cheap”. Trading at a trailing 12-month price-to-earnings (PE) ratio of 375x, it’s pricey by any metric. Even on a 12-month forward PE basis, its shares are trading at a PE multiple of roughly 167x.

The company’s stock got a boost as it was included in the S&P 500 Index in September 2024. Given the increasing market cap of the company – and the fact that it also qualified for inclusion in the index through its profit numbers – that was a big boost for Palantir.

Inclusion into the S&P 500 Index carries with it a lot of buying of stock of the added company, mainly because passive index funds and ETFs have to purchase additional shares to meet the weighting requirement. 

For Palantir, that helped accelerate its rally, with its share price up around 119% from the date of its inclusion to the end of the year; a period of less than four months.

History doesn’t rule out another monster year for Palantir shares

For investors, the most recent big winners in the S&P 500 Index have gone on to do big numbers in the following year as well. Take NVIDIA Corporation (NASDAQ: NVDA), the giant chip company. In 2023, NVIDIA saw its share return a whopping 239%, making it the best-performing stock in the S&P 500 Index that year.

Of course, in 2024, NVIDIA shares were up another 178%. In 2018 and 2019, Advanced Micro Devices Inc (NASDAQ: AMD), also known as AMD, was the best-performing stock in the S&P 500 Index with a total return of 80% and 148%, respectively, in those two years.

So, for Palantir investors, there’s no saying that the stock couldn’t post another strong year in 2025. Indeed, respected technology analyst Dan Ives – from Wedbush Securities – stated in a note in late December 2024 that as more companies spend on their AI capabilities in 2025, Palantir will be one of the big winners. 

What Palantir needs to do in 2025

He goes on to write that Palantir is helping clients enable “data-driven decision making, with expanding use cases for its marquee products leading to a larger partner ecosystem with rapidly rising demand across the landscape for enterprise-scale and enterprise-ready generative AI”.

Ultimately, it will come down to two things in 2025 for Palantir and its stock; earnings and valuation. If the company can keep posting red-hot revenue growth (and profit) numbers and the market is willing to pay up for Palantir shares, then it could be another record year for the company.