Palantir Technologies: A Look at Its Recent Stock Surge and the Possibility of a Split

For its first few years as a public company, Palantir Technologies (PLTR -1.42%) faced significant challenges in the competitive enterprise software market. The company's slow growth and its dependence on inconsistent federal contracts led some to view Palantir more as a consulting firm for the government, rather than as a strong player in software development.

However, everything shifted on April 7, 2023, when Palantir’s CEO, Alex Karp, published an investor letter that significantly altered the company's public image.

In this communication, Karp announced the upcoming launch of Palantir’s fourth major suite: the Artificial Intelligence Platform (AIP). Since this announcement, Palantir’s stock has skyrocketed by an impressive 733% as of January 10.

This remarkable price increase coincides with a broader trend in the investment landscape, where artificial intelligence is becoming a focal point. It's important to note that Palantir’s growth is not solely a byproduct of this narrative. The company has demonstrated its ability to compete effectively against larger technology firms, highlighting how transformative the AIP has been for its business.

Given the steep rise in its stock price over a short period, the idea of a stock split for Palantir has emerged as a topic of interest. Below, we will delve into the reasons why Palantir might or might not opt for a stock split in the near future.

Reasons Palantir Might Consider a Stock Split

Recently, major technology companies such as Tesla, Nvidia, Apple, Amazon, Alphabet, and Broadcom have undergone stock splits. In previous analyses, it was noted that these companies saw significant increases in their share prices prior to announcing a split.

Palantir’s situation is quite similar. In 2024, the company’s stock rose by 340%, making it the top performer within the S&P 500.

The chart clearly indicates that Palantir's stock entered a period of rapid growth during the latter months of 2024. Consequently, its current valuation appears stretched, and its rising share price may become a barrier for smaller retail investors looking to buy in.

It's crucial to understand that stock splits do not alter the intrinsic value of a company. However, after a split, the adjusted price can psychologically seem more affordable to investors. This perception often drives demand and can lead to further increases in share prices.

Additionally, stock splits increase the total number of shares available on the market, enhancing trading liquidity. This increased accessibility could boost investor interest, especially among those who may have previously found the stock price prohibitive.

Reasons Palantir Likely Won't Pursue a Stock Split Soon

In November, Palantir made a significant change by switching its trading exchange from the New York Stock Exchange (NYSE) to the Nasdaq.

This decision likely stemmed from how the company wanted to be viewed by investors. Some analysts remain skeptical about Palantir’s long-term prospects. By relocating to the Nasdaq, which focuses more on technology stocks, Palantir aimed to align itself with other high-growth tech companies.

Furthermore, shortly after the move, Palantir was added to the Nasdaq-100 index, boosting visibility among institutional investors and reinforcing its profile in the tech sector. As Palantir continues to show potential for sustainable revenue growth and profit increases, it suggests that management may not feel the necessity to split the stock solely for increased liquidity.

Moreover, executing a stock split can be both time-consuming and costly. Such decisions require approval from the company's board of directors and involve considerable collaboration with investment banks and accountants to analyze the potential impacts of a split.

While Palantir has experienced significant success since the launch of AIP in April 2023, it remains in a development phase. It might be more prudent for management to concentrate on expanding the business and gaining market share rather than diverting attention to the theoretical implications of a stock split.

In summary, while the idea of a stock split is intriguing, it may ultimately distract from Palantir’s primary goal of growth and expansion.

Palantir, Stock, AI