Palantir vs. Meta Stock: Wall Street’s Preferred AI Growth Stock for 2024

Meta Stock

In the race for supremacy in the AI-dominated landscape, investors are closely comparing the performance of two notable stocks: Palantir Technologies (NYSE:PLTR) and Meta Platforms (NASDAQ:META), formerly known as Facebook. The year 2023 witnessed Meta’s extraordinary surge, making it a standout member of the elite “Magnificent Seven” group, alongside tech giants like Apple, Amazon, Alphabet, Microsoft, Nvidia, and Tesla. Meta’s stock skyrocketed by an impressive 184%, eclipsing the S&P 500’s more modest 25% gain. Wall Street’s enthusiasm for Meta is rooted in the company’s unwavering commitment to advancing AI research and seamlessly integrating this technology into its expansive ecosystem.

Contrastingly, Palantir Technologies experienced a robust 169% gain in its stock value during the same period, but some analysts remain skeptical about the underlying reasons. While Meta enjoys a “strong buy” rating, Palantir holds an overall “hold” rating. The following analysis aims to unravel the factors influencing these contrasting perceptions.

Palantir Technologies: Navigating the AI Landscape

Palantir, specializing in meeting the data analysis needs of both private entities and governments, garnered attention with its Artificial Intelligence Platform (AIP). This platform gained traction, particularly through lucrative government contracts, which proved instrumental in sustaining revenue streams during uncertain times. In the third quarter of the fiscal year, Palantir reported a substantial 17% year-over-year increase in total revenue, reaching $558 million. The company also achieved GAAP profits for the fourth consecutive quarter.

Palantir’s strategic alliances with CAZ Investments and PwC, coupled with a notable $250 million contract with the U.S. Army for advanced AI and machine learning tests until 2026, showcase its commitment to expanding its foothold in the AI domain. Despite these positive indicators, Jefferies Financial Group’s recent downgrade of Palantir to “sell” and a revised target price of $13 suggest concerns about the stock’s inflated valuation due to AI hype. Analysts anticipate a 20% growth in revenue and a 19% growth in earnings for Palantir in 2024, though the stock is perceived as overvalued, trading at 54 times forward 2024 earnings.

Wall Street’s Mixed Sentiment on Palantir Stock

Wall Street’s stance on Palantir stock presents a mixed picture, with a consensus “hold” rating. Among the 14 analysts covering PLTR, 2 advocate a “strong buy,” 1 suggests a “moderate buy,” and 4 favor a “hold.” Conversely, 2 analysts lean towards a “moderate sell,” and 5 recommend a “strong sell.” Despite surpassing its mean target price of $14.65, Palantir’s high target price of $25 implies a 49.5% upside potential over the next 12 months.

Meta Platforms: Expanding Beyond Social Media

Meta Platforms, renowned for its social media platforms such as Facebook, WhatsApp, Instagram, and Messenger, exhibited a remarkable 23% year-over-year revenue increase to $34.1 billion in Q3. Diluted earnings per share (EPS) soared by an impressive 168% to $4.39 during the same period. Meta’s diversification beyond social media into a comprehensive digital ecosystem, including virtual social gatherings, immersive gaming experiences, and e-commerce integrations, positions it for substantial growth.

The vast user base and extensive data reservoirs of Meta attract advertisers, resulting in a 23% increase in advertising revenue to $33.6 billion in Q3. CEO Mark Zuckerberg’s emphasis on AI investments, highlighted during the September Connect Conference, underscores the company’s commitment to AI development and the metaverse. Analysts anticipate Meta’s record-breaking performance in 2024, with revenue projected to rise by 13% year-over-year to $151 billion, and earnings reaching $17.40, a 21% increase from 2023.

Wall Street’s Bullish Outlook on Meta Stock

Analysts are overwhelmingly bullish on Meta Platforms stock, awarding it a unanimous “strong-buy” rating. Out of the 41 analysts covering the stock, 37 recommend a “strong buy,” one suggests a “moderate buy,” two advocate a “hold,” and one dissent with a “strong sell.” The average target price for META stands at $386.24, reflecting an 8.9% upside potential from current levels.

Choosing Between META and PLTR: A Long-Term Perspective

While both Palantir and Meta exhibit promising attributes for long-term investments in the AI-driven future, Meta Platforms emerge as a more compelling choice. The extensive growth prospects in AI and the metaverse, spanning social networking, immersive experiences, e-commerce, and more, position Meta for a robust performance in 2024. With a projected target price of $435, representing a 22.6% upside potential over the next 12 months, Meta Platforms appears poised for sustained success.

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