Palantir Stock's (PLTR) Explosive 500% Rally Puts Russell 1000 in Sight

Business Insider

a day ago

Palantir Technologies (PLTR) has been on a staggering run, with its stock climbing nearly 500% in the last 12 months. This rally is positioning the AI-driven software company for potential inclusion in the prestigious Russell 1000 Index. As index rebalancing approaches, Wall Street is watching closely to see if Palantir's soaring market cap is enough to secure a spot among America's largest publicly traded companies.
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For context, FTSE Russell updates the companies in its indexes annually, including the Russell 2000, which tracks small-cap stocks, and the Russell 1000, which includes large-cap companies, to reflect changes in their market value. It's updated annually in June based on rankings from May.
Why It Matters
For Palantir, the inclusion can boost visibility and attract passive fund inflows from index-tracking ETFs and institutions. Additionally, the shift from a mid-cap to a large-cap index may enhance its reputation.
Meanwhile, this move would leave a gap in the mid-cap tech space. According to Jefferies, the tech sector's weight in the mid-cap growth index could fall by more than 11% as a result. They also expect Palantir to face short-term selling pressure from passive funds during the index rebalancing.
The annual index reshuffle is scheduled for this Friday and is expected to trigger a surge in trading near the market close. That's because fund managers need to buy and sell stocks to match the updated index weights and membership, ensuring their portfolios stay aligned with the new structure.
Is PLTR a Good Stock to Buy?
Palantir continues to strengthen its position as a key defense technology partner, with the majority of its revenue coming from U.S. government contracts, particularly those with the Department of Defense. However, its sky-high valuation, trading at a forward P/E of 246 versus the sector median of 23.43, raises concerns about whether the growth justifies the price.
Nonetheless, investors appear willing to look past Palantir's steep valuation due to its strong foothold in the rapidly expanding AI sector. There's continued belief in the company's potential to translate its advanced AI tools into practical solutions for both government and commercial clients. Simply put, the surge in PLTR stock seems fueled more by the excitement around AI than by traditional valuation metrics.
What Is the Target Price for PLTR?
Overall, Wall Street has a Hold consensus rating on PLTR stock, based on three Buys, 10 Holds, and four Sells assigned in the last three months. The average Palantir share price target is $104.27, which implies a potential downside of 27% from current levels.