Meet the newest stock to hit the S&P 500. It’s up 430% since the beginning of last year, and is still a bargain right now, according to one Wall Street analyst

The S&P 500 is the best overall benchmark of the U.S. stock market, consisting of the 500 largest companies in the country. Given the size of its member companies, it is considered by many to be the most reliable measure of the overall performance of the stock market. To be included in the S&P 500, companies must meet the following requirements:

• Be a company based in the US

• Have a market capitalization of at least $8.2 billion

• Must be very liquid

• At least 50% of the outstanding shares must be available for trading

• Must be profitable in the most recent quarter under GAAP

• Must have been profitable in total over the previous four quarters

Palantir Technologies (NYSE: PLTR) Palantir Inc. is set to become one of the newest additions to the S&P 500, joining the ranks on Sept. 23 and one of just 11 companies added so far this year. Since the start of 2023, Palantir shares have surged 430% as accelerating adoption of generative AI has boosted revenue and strengthened profits.

Still, despite the run, some on Wall Street believe there’s still a long runway ahead. Let’s take a look at what sets Palantir apart and whether the stock is still a bargain.

AI pioneer before AI went viral

Palantir has been at the forefront of AI development for more than 20 years. It first created advanced algorithms to help the U.S. government and its allies identify and track potential terrorist threats by finding connections in seemingly unrelated data that could lead to potential attackers.

But Palantir soon turned its attention to enterprise companies, where the same AI models could find patterns in large amounts of data, resulting in actionable intelligence. The company’s decades of experience helped Palantir pivot when generative AI went viral last year, creating next-generation AI tools that businesses can actually use. The result of that effort is the Artificial Intelligence Platform (AIP), designed to help businesses make data-driven decisions.

In a demo video, Palantir shows how AIP uses business data to minimize the impact of shutting down a production line due to an approaching hurricane. The system analyzes existing orders and makes suggestions about which orders should be canceled, delayed or expedited, which shipments can be handled by other fulfillment centers, and how those decisions will impact both sales and backlogs. The system also evaluates other potential decisions, including the cost of hiring trucks to expedite deliveries ahead of the approaching storm and how that will impact profits.

Despite the obvious benefits, the technology involved can be daunting to all but the most technically savvy. Palantir overcame this hurdle by offering AIP bootcamps. These hands-on sessions are attended by executives and developers, who work closely with Palantir engineers to solve real business problems.

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This approach has proven to be wildly successful. Palantir grew its U.S. commercial customer base by 83% year over year and 13% sequentially in the second quarter. Palantir credits these AIP bootcamps with facilitating 27 new deals worth $10 million or more—most within weeks of customers attending one of these sessions.

Additionally, a deal closed just last month will bring AIP and Palantir’s Gotham, Foundry and Apollo platforms to Microsoft‘S (NASDAQ: MSFT) secured Azure Government Cloud, expanding Palantir’s existing government operations.

It’s hard to overstate the impact of this on the company’s bottom line. In the second quarter, revenue of $678 million grew 27% year over year and 7% quarter over quarter, resulting in Palantir’s seventh consecutive quarter of profitability — and its admission to the S&P 500. U.S. commercial revenue, led by AIP, grew 55% year over year, while customer growth was 83%. Remaining deal revenue (RDV) for the segment, which is the value of contracts not yet recorded in revenue, grew 103%.

Yet the opportunity that AI offers has only just begun. In Ark Invest’s Big Ideas 2024Cathie Wood estimates that the software opportunity associated with generative AI could be worth $13 trillion by 2030. The optimistic scenario is even higher, at $37 trillion.

Given the size of the opportunity and its location at the intersection of AI and business intelligence, Palantir is well positioned to capitalize on this secular tailwind.

The bulls are running

Don’t take my word for it. After Palantir joined the S&P 500, Bank of America Analyst Mariana Pérez Mora maintained a buy rating on Palantir shares, while raising her price target to a Street high of $50. That represents a potential upside of 45% from Monday’s close.

Mora calls it a “fundamental misunderstanding” of Palantir’s opportunity and calls the company’s inclusion in the S&P 500 a “watershed moment” because institutional investors will be forced to rethink what they think they “know” about Palantir, especially given its rapidly improving growth prospects.

To be clear, Palantir won’t be for every investor. The stock currently sells for 96 times forward earnings and 23 times forward revenue. However, its price-to-earnings-growth ratio (PEG) — which factors in meteoric growth — is less than 1, the benchmark for an undervalued stock.

For investors who can tolerate a little more volatility, Palantir is poised to take the AI ​​revolution to new heights, which could benefit shareholders in the process.

Should You Invest $1,000 in Palantir Technologies Now?

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Bank of America is an advertising partner of The Ascent, a Motley Fool company. Danny Vena has positions in Microsoft and Palantir Technologies. The Motley Fool has positions in and recommends Bank of America, Microsoft, and Palantir Technologies. The Motley Fool recommends the following options: long Jan 2026 $395 calls on Microsoft and short Jan 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.

Meet the newest stock to hit the S&P 500. It’s up 430% since the beginning of last year, and it’s still a bargain right now, according to one Wall Street analyst was originally published by The Motley Fool