Stock-Split Watch: Is Palantir Next?

Palantir (NASDAQ: PLTR) is up about 18-fold from its low in 2022. The big data stock has become a popular stock as its Artificial Intelligence Platform (AIP) has brought its customers eye-popping productivity gains.

Now, as its stock rises back to record levels, one might wonder whether Palantir is a stock split candidate. Let's take a closer look.

The state of Palantir stock

Indeed, Palantir has had an incredible run. In the fall of 2022, the stock had briefly fallen below $6 per share. With its massive gains, the stock now trades above $110 per share.

Interestingly, Palantir cannot credit artificial intelligence (AI) in a general sense. The company has long relied on AI and machine learning to conduct its analyses and make its recommendations.

However, it was not until the release of its generative AI-driven AIP that the company's results went to the next level. In its most recent earnings call, Palantir highlighted how a global insurer reduced a two-week process to just three hours. Another company, Anduril Industries, increased the efficiency of its response time to supply shortages by as much as 200x by using Palantir's software.

As a result of such gains, its 2024 revenue was almost $2.9 billion, growing 29% yearly, including a 36% annual gain in the fourth quarter. That allowed the company to earn $462 million for the year, up from $79 million in 2023. Amid such gains, the stock has risen considerably, moving higher by more than 400% over the last 12 months.

PLTR data by YCharts.

But where does that leave the stock?

Still, those gains bear little relation on its stock split status. That's because Palantir, like every other stock, has the right to split its stock anytime the company chooses. Hence, one cannot rule that scenario in or out completely.

Nonetheless, as mentioned before, the recent stock surge takes it to the $110s per-share level. While that is a massive increase, that does not necessarily take it to a price level worthy of a stock split.

For example, when looking at stock splits from other top companies, Nvidia and Broadcom did not split last year until their pre-split stock prices exceeded $1,000 per share.

Also, another possible motivator is price weighting. This is especially true for the stocks that comprise the Dow Jones Industrial Average. The Dow is a price-weighted index, meaning a component's influence over the index is based on its nominal stock price. To mitigate that influence, the 30 components may split their shares periodically.

Palantir is not a Dow 30 stock. However, only eight of the 30 Dow stocks currently have a price below Palantir's, so even by its more stringent standards, Palantir does not look much like a stock split candidate.

Investors might also question whether Palantir can maintain the current stock price amid high multiples. While one could dismiss the price-to-earnings (P/E) ratio above 600, the forward P/E ratio exceeding 200 indicates its high valuation may not be an anomaly.

Additionally, the company's price-to-sales (P/S) ratio of approximately 100 is far above the S&P 500's median sales multiple of 2.8. That is added confirmation that Palantir's stock price is probably years ahead of itself.

Is Palantir a candidate for a stock split?

In the current stock-trading environment, a stock split for Palantir either now or in the near future is highly unlikely.

For one, Palantir's nominal price is well below levels where other companies are splitting, even the ones pressured by the Dow to maintain lower nominal stock prices.

Also, one might question whether Palantir can even maintain its current stock price in the near term. The recent gains have taken its P/E and P/S ratios to nosebleed levels. Thus, one can argue that situation prices it for perfection, meaning it could experience a massive decline if it shows any sign of imperfection.

Hence, instead of wondering whether Palantir's stock is going to split, investors may want to ponder whether to continue holding the stock at all.

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Will Healy has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Nvidia and Palantir Technologies. The Motley Fool recommends Broadcom. The Motley Fool has a disclosure policy.