1 Popular AI Stock to Sell Before 2024
2 min read
2023 has been the year of the artificial intelligence (AI) stock, and 2024 could be another solid year for this cohort. But, a few stocks have gotten absolutely overheated and are trading at sky-high valuations. They may have a tough time hitting expectations in 2024, so it may be good to get out while you can.
One of these stocks is Palantir (NYSE: PLTR), a business that has excelled lately. In fact, I think it will do great in 2024 as well, but the stock is at a point where it is mismatched with the business.
Palantir’s business is excelling
One reason Palantir has been a popular AI pick is that it has been doing AI for a long time. Since its founding in 2003, Palantir has been laser-focused on applying AI-based analysis to data flows to give the end-user the most up-to-date information possible to make a decision.
Originally, this software was developed solely for government use by intelligence agencies, defense departments, and anywhere else where critical decisions must be made quickly. Palantir eventually expanded outside government contracts and into the commercial side, further expanding its market opportunity. Still, government contracts make up most of Palantir’s revenue, with 55% coming from government sources in Q3.
But that’s not to say commercial revenue won’t overtake it someday. Commercial revenue rose 23% in Q3 versus the government’s increase of 12%. Another bright spot was the U.S. commercial customer count, rising 37% year over year from 132 customers to 181.
As mentioned, Palantir’s business is doing well. I also expect this strength to continue into 2024, but the stock is valued in a way that doesn’t support what the business is doing.
The stock has many years of growth baked into it already
Palantir’s stock isn’t cheap. While the $17 price tag may seem cheap, you must look at what that $17 is buying you. By dividing the stock price by a financial statistic (like sales or earnings), investors can see how much they pay for a share of the business.
