Will Palantir Technologies be a trillion-dollar stock by 2030?

On November 26, 2024By Littum

Artificial intelligence (AI) has dominated Wall Street’s attention since it burst onto the scene about two years ago. While Nvidia was arguably the hottest AI stock of 2023, Palantir Technologies (NYSE: PLTR) seems to have taken the lead in this year’s race. The stock price has exploded, rising over 235% over the past year and around 900% since January 2023.

What triggered the price jump in 2024? It likely has to do with the company’s Artificial Intelligence Platform (AIP), which is a huge success and has helped ignite profitable and accelerating revenue growth.

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Now with Palantir at $147 billion market valueIs it time for investors to think bigger? Could Palantir Become a Trillion-Dollar Company by 2030?

Here’s what you need to know.

It doesn’t seem like a stretch to call AI one of the most significant advances in modern history. According to market research firm IDC, AI could create nearly $20 trillion in cumulative economic value by 2030. That’s both direct and indirect, meaning it doesn’t just count the AI applications themselves, but the value AI can create across other industries through increased productivity and efficiency.

Why is this important? It shows how diverse AI’s impact can be, and it plays right into Palantir’s hands. Palantir creates and deploys custom AI, machine learning and data analytics software. This software can perform a myriad of tasks. Palantir got its start in government work, helping with classified missions within the military. It helped roll out the COVID-19 vaccine during the pandemic. Today, it helps hospital systems run efficiently and detects financial fraud, among dozens of other applications.

Any organization large enough to have many moving parts (people, processes and data) is a potential customer.

Palantir’s total revenue grew 30% year over year in the third quarter, but its US revenue grew 44%, driven by 40% growth in public companies and 54% commercial growth. As US revenue grows and becomes a more significant part of the overall pie, it accelerates the company’s overall top-line growth:

PLTR Operating Income (Quarterly Annual Growth) Chart — PLTR Operating Earnings (Quarterly Annual Growth) data of YCharts

Palantir has quintupled its US commercial customer base over the past three years and still, remarkably, only has 321 US commercial customers. There are approximately 20,000 large companies (at least 500 employees) in the United States. It’s a wide-open possibility, even if Palantir ultimately only works with a fraction of them.

It’s hard to predict how much more Palantir’s growth will accelerate, but this growth story appears to be in its early chapters.

To become a $1 trillion company, Palantir needs to grow about seven times from its current size. Revenue growth, valuation or both can achieve it.

First, let’s project what Palantir’s revenue might look like in 2030. Analysts estimate that Palantir’s 2024 revenue will reach $2.8 billion. I will extrapolate that out five years with hypothetical growth rates of 20%, 30% and 40%. It would look like this:

Annual growth rate	Annual turnover ends 31 December 2029
20%	$7.0 billion
30%	10.4 billion dollars
40%	$15.0 billion

Table by author.

Palantir’s stock would need to trade at some pretty high valuations to achieve a $1 trillion market cap on $7-15 billion in revenue. The stock’s price-to-sales (P/S) ratio should be between 67 and 143, depending on whether Palantir’s revenue hits the high or low end of those projections.

I’m not going to tell you it’s impossible. Snowflakes was one of the hottest stocks on Wall Street at the end of 2021, when the company’s P/S ratio peaked at 183. However, that was during a stock market bubble. Snowflake is still down nearly 60% from its previous high, and its P/S ratio has collapsed by 90%. Such extreme valuations rarely end well.

Today, Palantir trades at a P/E ratio of 58. That’s not the 2021 Snowflake high, but it is even higher than its peak during the same market bubble!

PLTR PS Ratio Chart — PLTR PS ratio data of YCharts

Technically, Palantir can defy the odds, but I’d say it’s doubtful that the stock will approach a $1 trillion market cap by 2030. Palantir is a mighty impressive company, but the problem is that the stock is already on the wane at least a few years worth of growth. The math could change dramatically if the stock falls to a much lower valuation or Palantir grows well beyond the 40% I expected.

But beyond these things, Palantir has stock is arguably a bubble in itselfwhich may ultimately disappoint investors who expect more big things from the stock. Given all of this, it’s highly unlikely that Palantir can reach a trillion dollar valuation in just over five years. But the odds of it outperforming the overall market are still within reach, and it’s still worth a closer look.

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Justin Pope has no position in any of the shares mentioned. The Motley Fool has positions in and recommends Nvidia, Palantir Technologies and Snowflake. The Motley Fool has one disclosure policy.

Will Palantir Technologies be a trillion-dollar stock by 2030? was originally published by The Motley Fool