Uncovering the Top-Performing S&P 500 Shares in 2023: This Unexpected Entrant Has Caught Wall Street's Attention, and Predictions Regarding Its 2025 Performance are Stunning.
The S&P 500 (^GSPC, -0.22%) started the year strong, confirming its bull market status and breaking record high after record high. It's continuing this trend, aiming for an annual gain of over 27%, following last year's 24% increase. This means two great years for investors.
Technology companies have played a significant role in this growth, with investors flocking to those excelling in artificial intelligence (AI). With AI's potential to transform various industries, investors are eager to hop on the bandwagon early and reap the benefits. Unsurprisingly, the S&P 500's top performer this year is a company that launched a major AI-powered platform just last year.
Despite being around for about 20 years, this company's growth has skyrocketed recently, resulting in record earnings. It's performed so well that the S&P 500 invited it to join this year, and it joined in September.
Let's explore this company projected to gain 300% this year -- and learn about Wall Street's projections for this company in 2025.
Utilizing data for game-changing decisions
This particular company doesn't manufacture the hardware required for AI to function, such as chips or servers. Instead, it uses AI to power an incredibly powerful platform that has been serving governments for years. This company's software helps customers gather and utilize all their scattered and seemingly unrelated data to make potentially groundbreaking decisions. From governments to hospitals, airlines, and restaurant chains, customers are rushing to sign up for this system that could save them time and money while boosting performance in various projects.
The leading AI company behind this technology is Palantir Technologies (PLTR -0.58%), and the demand from both government and commercial clients has driven double-digit revenue growth in recent quarters. What's particularly exciting is Palantir's growth in commercial clients--from 14 U.S. commercial clients four years ago, Palantir now has around 300. And this could be just the beginning as companies look to leverage AI to boost efficiency and fuel growth.
Deal value is also positive, with Palantir closing over 100 deals worth over $1 million.
And to sustain this growth, Palantir came up with an innovative idea: It introduces potential customers to its Artificial Intelligence Platform (AIP) through AIP boot camps. These sessions help them go from zero to a potential use case in just hours, enabling them to immediately see how AIP will impact their businesses. Palantir claims that these boot camps have driven sales growth, and in the latest quarter, the company discussed how they converted into new deals--in fact, many customers' boot camps led to seven-figure deals in less than two months.
What Wall Street predicts will happen next
Given Palantir's strong performance this year, it's no surprise that Palantir stock has soared. However, according to Wall Street, the stock might have surged too quickly. The average analyst estimate calls for a more than 40% decline from this level over the next 12 months. The stock is trading at a mind-blowing 185x forward earnings estimates. This suggests that, despite Palantir's rapid growth, Wall Street anticipates a drop in the stock price in 2025.
Does this mean you should avoid Palantir? Not necessarily. Yes, the stock appears overpriced based on its forward price-to-earnings ratio. But it's important to remember that this measure often takes into account expected earnings in the coming year--and does not consider what Palantir's earnings picture may look like 5 or 10 years down the road.
I still don't see Palantir as the best investment for everyone today--for example, a value investor should consider other options. But long-term investors interested in growth companies in their early growth stages should give a second look to this top S&P 500 performer, despite its high valuation. Over time, investors could still profit from investing in Palantir, thanks to the unstoppable momentum of its commercial business and the company's AI-driven platform.
- In light of Palantir Technologies' impressive growth and record earnings, investors are considering whether to invest in this high-valued company, despite Wall Street predicting a potential 40% decline in its stock price over the next 12 months.
- With Palantir Technologies' innovative approach of introducing potential clients to its Artificial Intelligence Platform through boot camps, the company has seen significant growth in deals, fueled by its potential to save time and money while boosting performance in various projects.
