Palantir Technologies and MicroStrategy Secure a Spot in the Nasdaq 100, Raising Questions about Further Gains in their Shares.
The Nasdaq is a hub for some of the world's best-performing growth stocks. Among them, securing a spot in the Nasdaq 100 index is quite an achievement, as it comprises the top 100 non-financial stocks on the exchange. Recently, three companies joined this exclusive club – Axon Enterprise, Palantir Technologies, and MicroStrategy. While all three have seen impressive growth in 2024, our focus will be on Palantir and MicroStrategy, boasting phenomenal increases of over 300% each.
Let's delve into Palantir Technologies, a company capturing retail investors' attention with its tornado-like growth in 2024. With a staggering 340% increase, Palantir's data analytics solutions and valuable counterterrorism services have helped spark its explosive growth. However, their allure is not solely in their government services but the potential of the company's artificial intelligence (AI) solutions. With numerous potential industries that could benefit from its AI prowess, investors are more than willing to pay top dollar for this enticing tech stock.
With a growth rate of 30% in the third quarter of 2024 and CEO Alex Karp's bullish proclamations about perpetual AI demand, excitement around the stock is palpable. Remove the hype, and the picture begins to look less appealing. Although Palantir is on an upward trajectory, the challenge lies in the stock's stratospheric valuation. With a multiple of 161 times next year's profits, it's challenging to justify the stock on its fundamentals alone.
Now, let's look into MicroStrategy, which has scorched the charts compared to its rival, Palantir. Ending 2024 with a close to 400% increase, MicroStrategy has certainly caught the eye of investors and crypto enthusiasts alike. Its allure comes from its unwavering faith in Bitcoin, touting its title as the largest corporate Bitcoin holder.
Unfortunately, MicroStrategy's fundamental growth does not match the stock's explosive performance. The company actually reported a 10% decline in sales during the third quarter of 2024. And even though MicroStrategy's bullish stance on Bitcoin might have investors dusting off their cryptocurrency wallets, it's essential to remind them of the astronomically high volatility associated with cryptocurrencies.
MicroStrategy's stock is caught in the cryptocurrency's fluctuating tide. Even if Bitcoin continues its meteoric rise, as predicted by Cathie Wood of ARK Invest, MicroStrategy's technical challenges and reliance on cryptocurrency price movements might not support its lofty valuation. The stock is currently trading at an eye-popping 4,100 times its trailing earnings – a red flag for potential investors.
In conclusion, being a part of the Nasdaq 100 index will surely bring visibility and attention to both Palantir Technologies and MicroStrategy. However, their high valuations and reliance on retail investor sentiment point towards a market as fickle as a cryptocurrency. While the inclusion in the index could fuel their momentum, it's important to remind investors that both stocks embody significant risks and are best tackled with caution.
Investors should be aware of the stratospheric valuation of Palantir Technologies, currently at 161 times its next year's profits, despite its impressive 340% increase in 2024.
Due to its heavy investment in Bitcoin, MicroStrategy's stock is heavily influenced by the cryptocurrency's volatile price movements. Despite its 400% increase in 2024, the company reported a 10% decline in sales during the third quarter.
Joining the Nasdaq 100 index could boost the visibility of both Palantir Technologies and MicroStrategy, but their high valuations and market volatility suggest that they carry significant risks.
Investors should approach both Palantir Technologies and MicroStrategy with caution due to their high valuations and reliance on market sentiment, particularly for Palantir's potential in AI and MicroStrategy's faith in Bitcoin.
