Why the Recent Drop in Palantir Could Be a Perfect Buying Moment

Key Points

• Palantir was recently recognized as a leader in artificial intelligence and machine learning (AI/ML) software platforms.
• The recognition is another example of how Palantir is giving investors a reason beyond price to own its stock.  
• The next opportunity for PLTR stock investors will be its potential inclusion in the S&P 500.  

Palantir Technologies Inc. NYSE: PLTR continues to be one of the most discussed and polarizing stocks in 2024. The stock hit a 52-week high of $33.13 in late August but has fallen more than 10% as part of the broad market correction. While naysayers will say this is the beginning of a much-deserved pullback, some news from late August reminds investors of why they may be getting an opportunity to buy the dip. 

On August 29, 2024, Forrester recognized Palantir as a leader in artificial intelligence and machine learning (AI/ML) software platforms. Palantir was one of a select group of companies that the research and advisory firm invited to take part in its Forrester Wave: AI/ML Platforms Q3 2024 report.

By itself, the recognition from Forrester may not be as relevant to investors as the company’s recent contract wins. But it’s just another example of why “branding” matters as much in investing as it does in advertising.  

Palantir: Offering Value Beyond Price  

When marketing products, companies always look to give consumers a reason beyond price to buy their products and services. This idea may get dressed up in different words like “branding,” but delivering value beyond price is something that all companies aspire to deliver. 

The same can be said of the stocks that you buy. Many investors focus on a stock’s valuation and with good reason. It goes against the whole idea of buying low and selling high.  

Palantir has a forward price-to-earnings ratio of 160.7x and a price-to-sales of 30.7. Such outsized metrics may bring to mind meme stocks like GameStop Inc. NYSE: GME and AMC Entertainment Holdings Inc. NYSE: AMC.  

But as investors have seen time and again, a stock's price movement doesn’t always follow logical metrics. The difference between speculative stocks and technology stocks like Palantir or NVIDIA Corp. NASDAQ: NVDA is that the latter offers investors a business model that supports future growth.  

In fact, in announcing its selection of Palantir as a Leader in this space, the firm remarked, “Palantir has one of the strongest offerings in the AI/ML space with a vision and roadmap to create a platform that brings together humans and machines in a joint decision-making model.” Forrester went on to talk about how Palantir’s differentiated ontology supports the basis of its AI platform (AIP).  

Palantir combines AIP with its Foundry and Apollo platforms to connect AI directly into a company’s frontline operations. This helps to quiet another critique about Palantir. Specifically, as companies begin to use Palantir’s software, they are discovering how generative AI can go beyond being an intriguing novelty to a resource that helps them make insightful decisions that can drive their business forward.

S&P 500 Rebalancing: Palantir’s Next Big Catalyst?

By the time you read this article, the S&P 500 may have announced which stocks, if any, will be included as it performs its quarterly rebalancing. This is significant because only about 45% of the stock’s float is held by institutions.  

Of course, there’s no guarantee that PLTR stock will be added. After all, there are only so many stocks that can be included. That means if one stock is added, another has to be removed. But if Palantir is included, it will cause more institutional investors to climb on board.  

Bullish Analysts Join the Palantir Bandwagon with Higher Price Targets

If you’ve followed Palantir stock, you’re familiar with Dan Ives, the analyst from Wedbush, who has called Palantir "the Lionel Messi of AI." Ives has maintained an Outperform rating on PLTR stock and recently raised his bull price target on Palantir to $50.  

For a considerable amount of time, Ives was out on a limb. However, in the last month, both Raymond James and Northland Securities have assigned a price target of $30 or higher to PLTR stock. The overall analyst sentiment on PLTR stock remains neutral to bearish, but there are signs that sentiment is moving higher.  

Having said that, the market is in a downtrend, and PLTR stock may struggle to stay above $30 in the short term. However, long-term investors should look at any pullback as an opportunity to add to their position, as the stock's long-term outlook remains bullish.