Prognosis: Two Stocks Set to surpass Palantir's Value within the next 5 Years
What's the hottest S&P 500 stock of 2024, you ask? Well, hands down, it's Palantir Technologies (PLTR 6.25%). This AI and data analytics software provider has seen its shares skyrocket an incredible 320% year to date, giving it a mammoth market cap of around $165 billion. But I've got a feeling that Palantir's streak might be about to cool off.
Here are two other stocks that I believe will outperform Palantir in the next five years.
Expanding now, expanding in the future
Intuitive Surgical (ISRG 2.15%) might not seem like a groundbreaking pick, but let me tell you, this robotic surgical-systems maker is more than capable of outshining Palantir in the long run. With a market cap of around $194 billion, Intuitive Surgical is already larger than Palantir. But that's not all. I think this company is set to grow even further.
Intuitive has had a whopper of a year in 2024, with its da Vinci surgical system installed base increasing by 15% year over year in the third quarter. Its procedure volume jumped an impressive 18%. More systems and more procedures mean stronger revenue and earnings growth for this company.
Intuitive Surgical's growth prospects are looking pretty damn sweet, thanks to an aging population. People are getting older, and with that, they're more likely to need surgery. This should translate to accelerated procedure volume growth for da Vinci. In 2023, around 2.2 million procedures were performed with da Vinci. Intuitive estimates that roughly 7 million procedures a year are performed where it already has products and clearances. But here's the real kicker - three times that number of soft tissue surgeries are performed annually. That's a gigantic opportunity for this company.
Intuitive Surgical's valuation might be a little high for some investors, with shares trading at around 69 times forward earnings. But when compared to Palantir's forward earnings multiple of 161, Intuitive Surgical looks pretty darn reasonable.
A contrarian call
You might not believe me, but I'm going out on a limb and predicting that Pfizer (PFE -0.07%) will surpass Palantir's market cap in five years. Pfizer's current market cap of $145 billion is a far cry from Palantir's. And let's face it, Pfizer hasn't had the best year in 2024. But I've got my reasons for thinking Pfizer could outshine Palantir in the future.
I honestly think that Pfizer is one of the most underrated stocks out there, while Palantir might be a little overrated. Palantir's shares trade at an absurd 161 times forward earnings. Meanwhile, Pfizer's shares only trade at 8.6 times forward earnings. That's half the size of the average S&P 500 healthcare stock's forward earnings multiple. And Pfizer's price-to-earnings-to-growth (PEG) ratio based on five-year earnings growth projections is a ridiculously low 0.18, according to financial-markets infrastructure and data provider LSEG.
Now, I know what you're thinking - Pfizer is cheap for a reason. The company's COVID-19 product revenue has taken a big hit since the pandemic's peak. Pfizer also faces the loss of patent exclusivity for multiple blockbuster drugs. And some investors are worried about what the second Trump administration could mean for the company.
But hear me out - Pfizer is putting its COVID-19 windfall to good use. The company has used its cash to beef up its product lineup and pipeline. Pfizer has several new products resulting from acquisitions, including migraine therapy Nurtec ODT and cancer drugs Adcetris, Padcev, and Tukysa. Pfizer's internal research and development is also paying off, with its respiratory syncytial virus vaccine Abrysvo's 53% market share a prime example.
And let's not forget about Pfizer's sweet as hell dividend. With a forward dividend yield of 6.7%, Pfizer offers one of the most attractive dividends in the healthcare sector (or any sector for that matter). And Pfizer's management consistently prioritizes maintaining and growing this dividend.
So yeah, Pfizer might not be as sexy as Palantir. But my hunch is that investors will come to appreciate this pharma stock in a big way over the next five years. Maybe I'm wrong, but I'd put money on Pfizer becoming a bigger company than Palantir by the end of the decade. Isn't that just ducky?
The potential growth of Intuitive Surgical in the field of robotic surgery and its expanding market opportunities could make it a strong contender for outperforming Palantir in investing terms, considering its lower valuation despite its market cap being larger than Palantir's.
Despite Pfizer's current market cap being significantly lower than Palantir's, its low forward earnings multiple and PEG ratio, coupled with its strategic acquisitions, internal research and development successes, and attractive dividend yield, make it a potential investment option with a high growth potential in the future.
