Palantir’s quarterly report is teeming with customer testimonials detailing their success stories with AIP, and the evidence is clear. In the third quarter, Palantir closed 104 deals worth at least $1 million. Of those, 36 were worth $5 million or more, while 16 were worth at least $10 million. The company said that many of these agreements were consummated within just weeks of the customer attending a boot camp session.

Palantir’s overall results paint a compelling picture. Revenue grew 30% year over year to $726 million, while also climbing 7% quarter over quarter. This also marked the company’s eighth consecutive quarter of profitability, a streak that contributed to its acceptance into the S&P 500.

Perhaps more telling was Palantir’s U.S. commercial revenue, including AIP, which grew 54% year over year, while its customer count grew by 77%. This helped the segment’s remaining deal value (RDV) soar 73%. When RDV is growing faster than revenue, it provides insight into the company’s future prospects — which are rapidly improving. It also shows that Palantir is quickly moving beyond its reliance on government contracts.

While there’s no consensus regarding the total addressable market for generative AI, the magnitude of the estimates can be instructional. In Ark Invest’s Big Ideas 2024, Cathie Wood concludes that the AI software market could surge to $13 trillion by 2030. The bull case is even more mind-boggling, at $37 trillion. Given Palantir’s expertise in the field and its success in helping customers implement AI solutions, it’s clear that the company has a long runway ahead.

There’s no denying Palantir’s lofty valuation, which has Wall Street split. Of the 19 analysts that covered the stock in October, six rate it a buy or strong buy, seven label it a hold, and the remaining six rate it underperform or sell. What’s almost universal among the bears is concerns about its valuation — but looks can be deceiving.

The stock is currently selling for 160 times forward earnings and 40 times next year’s sales. However, its forward price/earnings-to-growth (PEG) ratio — which factors in Palantir’s accelerating growth rate — comes in at 0.5, when any number less than 1 is the standard for an undervalued stock.

I’m not the only one who believes the stock is still a buy. In the wake of its admission to the S&P 500, Greentech Research analyst Hilary Kramer opined that Palantir “easily can be” a $100 stock.” That represents potential gains for investors of 65% compared to Wednesday’s closing price.

The analyst cites Palantir’s robust and accelerating revenue and profit growth and growing backlog as catalysts for a revaluation of the stock.

For investors still convinced Palantir is too expensive, dollar-cost averaging provides a mechanism to build a position over time, adding more shares when the multiple is more attractive.

To be clear, Palantir Technologies won’t be a fit for every portfolio. However, for those with an appropriate investing time horizon — and a cast-iron constitution — Palantir is tapping a vast opportunity within the AI ecosystem, which could be extremely profitable for investors.

Ever feel like you missed the boat in buying the most successful stocks? Then you’ll want to hear this.

On rare occasions, our expert team of analysts issues a “Double Down” stock recommendation for companies that they think are about to pop. If you’re worried you’ve already missed your chance to invest, now is the best time to buy before it’s too late. And the numbers speak for themselves:

• Amazon: if you invested $1,000 when we doubled down in 2010, you’d have $22,819!*

• Apple: if you invested $1,000 when we doubled down in 2008, you’d have $42,611!*

• Netflix: if you invested $1,000 when we doubled down in 2004, you’d have $444,355!*

Right now, we’re issuing “Double Down” alerts for three incredible companies, and there may not be another chance like this anytime soon.

See 3 “Double Down” stocks »

*Stock Advisor returns as of November 11, 2024

Danny Vena has positions in Palantir Technologies. The Motley Fool has positions in and recommends Palantir Technologies. The Motley Fool has a disclosure policy.

Meet the Newest Addition to the S&P 500. The Stock Has Soared 845% Since Early Last Year, and It’s Still a Buy Right Now, According to 1 Wall Street Analyst. was originally published by The Motley Fool