Will Palantir Technologies Inc (PLTR) join the S&P 500 index next month?

S&P Global recently announced that the S&P and Dow Jones Indices would reevaluate the current weightings, and companies included, on the S&P 500 next month.

A legendary milestone

The famous index, known for hosting the 500 most influential and biggest companies by market capitalization on the NYSE (although there are other qualifying requirements too), is synonymous with brands of a certain caliber. For many, it represents a sense of legitimacy and legacy that cannot be bought.

Companies do not debut on or exit the S&P 500 often – some have been on the index for more than 50 years – so any new name is big news. And rumor has it that the next company which may be the S&P’s latest addition is Palantir Technologies.

But Palantir Technologies has been a business since 2003, with a market cap worth more than $30 billion for years. So, what’s suddenly changed?               

A new era for Palantir

Palantir was first tipped for S&P inclusion after the publishing of its Q4 2023 financial results last earnings season.

That’s because there’s more to inclusion on the S&P than just market cap. As S&P itself notes, companies need to have a “history of positive earnings and must meet certain liquidity and size thresholds”.

In its Q4 2023 financial results, Palantir reported a smash hit set of earnings – including the fact that the company was profitable for the first quarter ever. After the company reported a a positive GAAP income figure of over $30 million on February 13^th, Palantir stock prices soared by close to 20%.

But one swallow does not a summer make. Notice that the S&P Global document we referenced above mentions a history of profitability, not a once-off occurrence.

The time is now

Yet, with Palantir reporting its earnings later today, all that could change in a few hours’ time. If the company reports two consecutive quarters of profitability – or, better yet, increasing profits QoQ – that likely satisfies the eligibility requirements for S&P 500 inclusion.

Forecasts among analysts concur that more profitability is very likely for Q1’s results. In fact, mega-bank Citigroup just today raised its price target for Palantir Technologies significantly, from $20 to $23, ahead of the earnings.

Plus, there’s the fact that the Palantir stock price is up by over 6% today so far alone, indicating a definite bullishness, even though US markets have only been open a couple of hours.

And with Palantir being an AI technology stock, the sky may well be the limit from there. The S&P gang may well be looking for excuses to add the of-the-moment stock to the fold by now.

What will happen to Palantir’s stock price if it joins the S&P 500 index?

S&P Global notes that stocks added to the S&P 500 index tend to do very well upon being named members, stock prices skyrocketing at the news.

Historically, that new addition’s stock price will, impressively, outperform the S&P 500 index itself between its ‘announcement date’ (for debuting on the index) and the effective date it’s added. This is then usually followed by a brief correction.

Part of the reason for this is that funds which track the index (and there are a lot of them) must have holdings in all the companies on the S&P, meaning that a wave of prestigious funds will be purchasing Palantir shares as soon as the company lists.

From there, it’s likely that market sentiment will only take it to new heights. But all of this is still, at this point conjecture. At least until Palantir’s earnings today.

Palantir Technologies will reports its Q1 results after close of US markets today, with a webcast being hosted to discuss the results at 5pm Eastern Time.

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