If the growth of Palantir starts to show signs of delay, it can lead to a considerable correction for this highly priced stock.
Palantir Technologies (Funger 1.98%)) Has an unstoppable stock to possess in recent years. It is a trusted partner for the US government and it also let its commercial company grow at a rapid pace, largely thanks to the success of its artificial intelligence platform (AIP). In the past 12 months, the shares of Palantir have risen an amazing 380%.
But there can be problems. There is a lot of competition in space and it can have a big rival to worry about, one that focuses on national security and that can undermine it on price.
Image source: Getty images.
Will Missionforce offer Palantir’s customers an attractive and cheaper alternative?
Sales and marketing giant Salesforce (CRM -3.35%)) is a big name in data analysis. The software helps companies connect with customers, so that they can improve their activities and increase their sales. It has also used AI and now offers AI agents whom it says they can offer companies access to a digital labor force to add even more efficiency.
However, Salesforce does not stop there. It has taken note of the success of Palantir in focusing on national security efforts and it has recently launched a new business unit, which is called missionforce. The company says that the goal is “to help our war fighters and the organizations that support them work smarter, faster and more efficiently.”
And this may not be just a small and subtle move. Salesforce can see an opportunity to undermine Palantir with Mission Force. CEO Marc Benioff said that Palantir’s software was ‘the most expensive business software I have ever seen’, suggesting that Salesforce may be able to increase its own prices and still be competitive.
If the growth of Palantir shows signs of delay, the stock can be in trouble
Palantir has been a fascinating shares to possess, given the accelerating growth in recent years, and therefore many retail investors see it as not to stop.
PLTR Revenue (quarterly YOY growth) data from YCHARTS
However, is the care I have what can happen if that growth inevitably slows down? The excitement is still extremely high around the company today and market capitalization stays enormously at $ 424 billion, while Salesforce is worth around $ 230 billion.
There is a considerably downward risk with the stock of Palantir only because of how incredibly expensive it is. It is traded at a price-profit (p/e) multiple of almost 600. Salesforce, meanwhile, acts on a p/e of 35, which is already expensive, since investors pay 25 times income for the average shares on the S&P 500. Both AI shares are too expensive, but the valuation of Palantir is at an obscene level.
Even if you are not worried about missionforce, you may want to think twice about buying Palantir’s stock
The launch of Missionforce may not necessarily steal a large number of customers away from Palantir, but it is an example of the growing risk that the company can be confronted with in the long term of other data analyzed companies. Competition can lower prices and chip the margins from Palantir. It can lead to less profit growth and the problem is that with such an extremely high valuation there is virtually no safety margin for investors who buy the share today; There is a lot of next to the risk.
Palantir has been a hot share for retail investors in recent years, but that does not mean that it will continue to rise forever. At a certain point there will probably be a correction, because the basic principles of the shares are disconnected from his appreciation, because this is undoubtedly one of the most expensive shares on the market. If you buy the Palantir shares at the current levels, you take a significant risk.
David Jagielski has no position in one of the aforementioned shares. The Motley Fool has positions and recommends Palantir Technologies and Salesforce. The Motley Fool has a disclosure policy.
