Palantir stock leaps on big S&P 500 boost for data analytics group

Palantir shares powered higher in early Monday trading after news that the data-analytics group, which has been trading publicly only for the past four years, will be added to the S&P 500.

Palantir ( PLTR ) , which went public in 2020, has added more than $35 billion in market value over the past year. It chosen to replace stalwart American Airlines ( AAL ) in the S&P 500.

S&P Dow Jones Indices, which manages the benchmark, said Palantir, Dell Technologies ( DELL ) and Erie Indemnity ( ERIE ) would join the broadest list of U.S. blue-chip shares on Sept. 23. American, Etsy ( ETSY ) and Bio-Rad Laboratories ( BIO ) will join the mid-cap S&P 400 index.

Stocks added to the benchmark must have market capitalizations of at least $13.1 billion, be highly liquid, have a float of at least 10% of shares outstanding, and have maintained positive earnings over the past four quarters.

Inclusion in the benchmark typically attracts buying interest from investment funds that track the value of major indexes by holding the stocks within them.

The so-called S&P 500 inclusion effect, however, has been mixed over the past decade, with a recent Standard & Poor’s indicating little long-term impact from a stock's place in the benchmark.

Nonetheless, the addition of Palantir, an artificial-intelligence-focused data-analytics group that caters to commercial and government clients, marks a key milestone in its 20-year history and validates investor enthusiasm for the Denver-group founded by Peter Thiel and Joe Lonsdale.

"This was a moment that Palantir investors have been anxiously waiting for over the past year as the profitability profile of this story has significantly been bolstered with this, another validation moment for the Palantir story," said Wedbush analyst Dan Ives.

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"In a nutshell, getting added to the S&P 500 Index is an important moment in the Palantir story that we believe marks a new era of enterprise growth and profitability over the next few years," he added.

Palantir commercial-unit sales get a boost

Palantir recorded a notable surge in its commercial-division sales last quarter, a move that helped the group raise its annual profit forecast. It is expanding its AIP Logic platform, which tests and improves AI-related strategies, outside its legacy government-client list.

The group forecast full-year sales of around $2.75 billion, a modest boost from its prior estimate, with adjusted profit from operations in the region of $966 million to $974 million.

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It also unveiled a new partnership with Microsoft ( MSFT ) that will see the tech giant integrate Palantir's products into Azure's cloud services for government customers.

Palantir will adopt Azure's OpenAI, with the ability to deploy it in classified environments among its growing base of government and intelligence community clients.

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"We believe this is the start of a multiyear cycle for Palantir to continue generating significant deal flow as more organizations look to add AI capabilities that provide value and innovation in real time across operations that are unique to each enterprise," Ives said.

Palantir shares were marked 7.15% higher in premarket trading to indicate an opening bell price of $32.50, a move that would extend the stock's six-month gain to around 28%.

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