Palantir Stock Joins the S&P 500; Is It Time to Buy?

Key Points

• Palantir stock is now trading as part of the S&P 500; a significant milestone for the company and for retail investors.
• Bank of America has been the latest analyst to raise their price target on PLTR stock to a bullish $50.  
• Using a dollar-cost averaging (DCA) strategy may be the best way to manage a position in PLTR stock until earnings.  

Palantir Technologies Inc. NYSE: PLTR began trading as a member of the S&P 500 index on September 23, 2024. Inclusion in the index was a long-time goal of Palantir. It’s also a significant milestone for retail investors who have largely driven the growth of PLTR stock since it went public via a direct listing in 2020.  

Palantir is one of the most discussed, and polarizing, technology stocks in 2024. One reason for that is because PLTR stock is also one of the best-performing stocks in 2024. It's up 114% as of this writing.  

This has many investors who have been on the sidelines wondering if now is a good time to start a position. And if you already have a position, is now a time to “load the boat?” It’s not an easy question to answer, but with so much news circulating around the company, it’s a good time to assess where things stand. 

Institutions Will Buy More PLTR Stock 

One of the most significant benefits of inclusion in the S&P 500 is that institutional investors will have to start buying PLTR stock. To be fair, institutional buying has outpaced selling by an almost three-to-one margin in the last 12 months. However, any index fund manager using the S&P 500 as its benchmark must ensure PLTR stock is one of its holdings.  

The PLTR stock chart shows a significant increase in the volume of shares bought on September 23. This is likely the beginning of institutional buying activity. However, it’s important to note that for every buyer, there has to be a seller, so the current buying activity may be more significant for defining a floor for PLTR shares.  

Analysts Are Coming Around on PTLR Stock 

But what about the ceiling? Dan Ives of Wedbush has been one of the most bullish analysts on PLTR over the past year. He currently has a price target of $38 on PLTR, but his bull case upside is $50.  

That was the price target that was recently posted by Bank of America NYSE: BAC. The bank also placed Palantir on its US-1 list, a compilation of its best investment ideas.  

Two New Contracts Since the S&P 500 Announcement 

One concern about Palantir is that the company’s future growth is already priced in. However, since the S&P 500 announced Palantir’s inclusion, the company has announced two significant contracts: one on the government side and one on the commercial side. 

The commercial contract expands its current partnership with Nebraska Medicine, a multimillion-dollar contract paid out over several years. Healthcare is one of the company’s most intriguing verticals because of the possibilities Palantir’s software can provide in increasing the efficiency of this industry.  

On the government side, the U.S. Army awarded Palantir with a five-year fixed-price contract of nearly $1 billion ($99.8 million) for user licenses for the Maven Smart System AI tool. That's $40 million per year over the next five years that will go to Palantir’s topline number.  

Palantir is a Strong Long-Term Buy, But Guard Against FOMO on the Upside 

With the prospect of 35% stock price appreciation in the next 12 months, it may seem like the time to load up on PLTR stock. But you’ll want to beware of FOMO (i.e. fear of missing out). The stock is overvalued by almost every traditional fundamental metric. You may not put much weight on those metrics, but many investors do, which may keep a lid on the stock.  

Simply put, Palantir has tremendous upside potential, but that growth may not come in a straight line. Although Palantir seems to make new positive headlines weekly, the next true catalyst will likely be its earnings report on November 7, 2024. That’s two days after the U.S. presidential election, so it could be a volatile time for stocks.  

A better strategy right now may be to use a dollar-cost averaging (DCA) strategy and wait for significant pullbacks to increase the amount of your buys. If you’re unfamiliar with the concept of dollar-cost averaging, it simply means putting the same amount of money into a stock at regular intervals. Spreading out your purchases can reduce price risks.  

Regarding a stock like Palantir, we look at it as a “trust but verify” strategy. If the stock will pull back, you’ll benefit from that. But if $36 is the new floor, you’ll buy the stock at the new “best price.”