Cathie Wood Predicts the S&P 500's Top Performer for 2024, Raising Questions About Investing in This Contender in 2025.
Cathie Wood, the fearless leader of Ark Invest, is renowned for identifying innovators early in their journey and holding onto them for the long haul. She's not afraid to buck the trends, buying a stock Wall Street advises against or ignoring a favorite of the masses. It might not guarantee immediate wins, but Wood firmly believes that sticking to this strategy will eventually lead to major victories.
Currently, some of her most significant investments include forward-thinking companies like Tesla, Roku, and Coinbase Global, making up the top three of her star Ark Innovation fund. Investors looking for companies with ambitious visions and the technology to bring them to life often turn to Wood for guidance and inspiration.
Recently, Wood decided to lighten her load on a stock that had been the S&P 500's top performer in the previous year. The celebrated investor divested from this technology powerhouse during multiple trading sessions in recent times. Should you follow her lead and avoid this company in 2025?
The Skyrocketing Stock
The identifiable tech titan that Wood has been parting with is none other than Palantir Technologies (PLTR), a company whose share value soared by an impressive 340% in 2024. Drawn by Palantir's AI-driven software, customers flocked to the company in droves.
Palantir offers a platform where customers can effortlessly collect and utilize their data more effectively. Despite sounding dull, this process is critical. By streamlining this process, customers can significantly improve their efficiency and even develop new business lines or products.
In the past, government organizations were Palantir's primary clients. However, in recent times, commercial clients have played an equally significant role in the company's growth. Today, both government and commercial clients are reporting double-digit revenue growth. This dual expansion is promising as it means that Palantir is seeing strong performance in both sectors. For instance, U.S. government revenue climbed by 40% in the recent quarter, while U.S. commercial revenue surged by 54%.
Looking at the commercial market provides hope for the future. Just four years ago, Palantir had only 14 U.S. commercial clients. Today, the company has approximately 300, opening up ample room for continued growth.
Palantir's latest groundbreaking offering, the Artificial Intelligence Platform (AIP), introduced just over a year ago, could contribute to growth in both government and commercial sectors in the forthcoming quarters. This platform enhances AI-driven decision-making and has been widely appreciated, thanks to Palantir's ingenious approach to engaging potential clients through AIP boot camps. These workshops enable future users to transition from no-tech beginners to having a potential use case within mere hours.
Boot Camps and Signed Deals
Impressively, boot camps have resulted in signed contracts. In the most recent quarter alone, three commercial clients signed million-dollar deals just two months following their boot camp sessions.
Consequently, the record quarterly profit of $144 million reported in the latest period could have even more room for growth.
Should you follow Cathie Wood's move? Even though she's been offloading Palantir shares, the company remains one of her top investee companies, occupying the fifth-largest position in Ark Innovation with a weight of more than 5.7%. It suggests that Wood hasn't lost confidence in Palantir but rather may have been cashing in some profits.
At present, Palantir stock isn't a bargain from a forward price-to-earnings (P/E) perspective, trading for 136x forward earnings estimates. This high valuation could weigh on short-term performances, making it unsurprising that investors with considerable Palantir holdings might be cashing out, anticipating that the stock might not immediately skyrocket further.
However, due to the demand for its products and its growth potential, Palantir still presents a worthwhile long-term growth investment in 2025, even if you are joining the party at the current price level. In the long run, this investment could yield substantial returns.
Cathie Wood, despite divesting from Palantir Technologies during multiple trading sessions, still considers it as one of her top investee companies, holding a significant position in Ark Innovation. Despite the high valuation of Palantir's stock, trading at 136x forward earnings estimates, it remains a promising long-term growth investment in 2025 due to its demand and growth potential.
Investors looking to diversify their portfolio and seek high returns might consider allocating some of their money in Palantir's shares, understanding that this investment might not provide immediate returns but could yield substantial benefits in the long run.
