Palantir shares powered higher in early Monday trading after news that the data-analytics group, which has only been trading publicly for the past four years, will be added to the S&P 500.
Palantir (PLTR) , which went public in 2020, has added more than $35 billion in market value over the past year, was chosen to replace stalwart American Airlines (AAL) in the S&P 500.
S&P Dow Jones Indices, which manages the benchmark, said Palantir, Dell Technologies (DELL) and Erie Indemnity (ERIE) would join the broadest list of U.S. bluechip shares on Sept. 23, with American, Etsy (ETSY) and Bio-Rad Laboratories (BIO) leaving for the mid-cap S&P 400 index.
Stocks added to the benchmark much have a market cap of at least $13.1 billion, be highly liquid, have a float of at least 10% of shares outstanding and mut have maintained positive earnings over the past four quarters.
Inclusion in the benchmark typically attracts buying interest from investment funds that track the value of major indices by holding the stocks within them.
The so-called S&P 500 inclusion effect, however, has been mixed over the past decade, with a recent Standard & Poor’s indicating little long-term impact from a stock’s place in the benchmark.
Nonetheless, the addition of Palantir, a data-analytics group focused on AI that caters to commercial and government clients, marks a key milestone in its 20-year history and validates investor enthusiasm for the Denver-based group founded by Peter Thiel and Joe Lonsdale.
Billionaire investor Peter Thiel helped co-found Palantir Technologies in 2003 before taking it public in 2020.
“This was a moment that Palantir investors have been anxiously waiting for over the past year as the profitability profile of this story has significantly been bolstered with this another validation moment for the Palantir story,” said Wedbush analyst Dan Ives.
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“In a nutshell, getting added to the S&P 500 Index is an important moment in the Palantir story that we believe marks a new era of enterprise growth and profitability over the next few years,” he added.
Commercial earnings boost
Palantir recorded a notable surge in its commercial division sales last quarter, a move which helped the group raise its annual profit forecast as it expands the success of its AIP Logic platform, which tests and improves AI-related strategies, outside its legacy government client list.
The group forecast full-year sales of around $2.75 billion, a modest boost from its prior forecast, with adjusted profit from operations in the region of $966 million to $974 million.
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It also unveiled a new partnership with Microsoft (MSFT) that will see the tech giant integrate Palantir’s products into Azure’s cloud services for government customers.
Palantir will also adopt Azure’s OpenAI, with the ability to deploy it in classified environments among its growing base of government and intelligence community clients.
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“We believe this is the start of a multi-year cycle for Palantir to continue generating significant deal flow as more organizations look to add AI capabilities that provide value and innovation in real time across operations that are unique to each enterprise,” Ives said.
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When a company is added to the S&P 500, many mutual funds and ETFs, which track this index, are required to purchase the shares of the new company. This usually leads to a short-term increase in the stock price. Specifically, index funds and passive… pic.twitter.com/nUcmjXYI6j
— MarketMaestro (@MarketMaestro1) September 8, 2024
Palantir shares were marked 7.15% higher in premarket trading to indicate an opening bell price of $32.50 each, a move that would extend the stock’s six month gain to around 28%.
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