Recently, CNBC Mad Money host Jim Cramer reviewed a few stocks that have soared sky-high this year. Cramer stated that while investors may have dismissed these stocks as speculative, they were actually smart investments. While he adds he's not recommending them at current “frothy” levels, he said, "These names are often the epitome of speculating wisely, which can be the key for terrific long-term performance — of course, only when melded with index funds."
Out of the 10 stocks Cramer reviewed, the three we are discussing today are Palantir Technologies (PLTR), AppLovin Corporation (APP), and AST Spacemobile (ASTS). So far this year, Palantir stock has soared 257.3%, AppLovin has gained a mind-blowing 748%, and AST stock has gained 305%, compared to the S&P 500 Index's ($SPX) gain of 23.6%.
Given the massive rally, some investors may believe they missed out on these growth stocks. However, there is a lot more room for these three to grow, which could be rewarding for long-term investors.
#1. Palantir Technologies
Valued at $138.4 billion, Palantir Technologies is known for its data analytics and AIP, or Artificial Intelligence Platform, which serves both the commercial and government sectors. Both its Palantir Gotham and Palantir Foundry platforms have generated significant demand in recent quarters, resulting in robust growth.
In the most recent third quarter, total revenue increased 30% year-over-year, while adjusted earnings rose 43% year-over-year, thanks to strong growth in both commercial and government revenue. Palantir's tools are deeply embedded in the U.S. defense, intelligence, and public health systems, generating a consistent revenue stream. Its recent multi-year deals with the U.S. Department of Defense and NATO are impressive. It is also risky, because Palantir's revenue is still primarily derived from a small number of government clients.
As a result, it has aggressively expanded into the commercial space, forming partnerships with companies in healthcare, manufacturing, and finance.
Analysts who follow the stock expect revenue to rise by 25.5% in 2024 and 24.1% in 2025. Earnings are expected to rise by 51% in 2024 and 24.7% in 2025. The stock is expensive, valued at 129.7x forward 2025 earnings and 43x forward sales.
Despite its high growth potential, analysts have a neutral outlook on PLTR stock. Currently, PLTR stock is not a “buy,” but rather a “hold” on Wall Street, with many skeptics citing concerns due to its overvaluation.
While bulls argue that the company's role in AI and potential for more commercial contracts warrant a higher valuation, bears remain cautious due to macroeconomic uncertainties.
Of the 15 analysts who cover PLTR, two recommend a "strong buy," six say it’s a "hold," two rate it a “moderate sell,” and five rate it as a “strong sell.” Palantir has surpassed both its mean price target price of $33.78 and the high estimate of $57.
I believe Palantir is well-positioned to capitalize on long-term trends in data analytics, AI adoption, and digital transformation. However, due to its overvaluation, it is best suited for those with a high risk tolerance.
#2. AppLovin Corporation
Valued at $107.7 billion, AppLovin Corporation is a key player in the mobile advertising and app monetization industry. Its robust software solutions and innovative advertising technology using AI have garnered significant attention from investors in 2024.
The company operates through two segments. The software platform, AXON, uses machine learning to optimize ad placements and improve developers’ monetization. Thanks to the AXON models, the software segment contributed the most to total revenue in Q3, $835 million to be exact, an increase of 66% over the prior-year quarter.
The apps segment, which includes a portfolio of mobile games, grew 1% during the quarter. Total revenue increased 39% to $1.2 billion, while net income increased by 298.1% year-on-year to $434 million.
Analysts predict that Applovin's revenue and earnings will rise by 39.9% and 313.6%, respectively, in 2024. Revenue and earnings could further increase by 20.5% and 40% in 2025, respectively.
AppLovin's stock is expensive, trading at 56 times forward estimated earnings for 2025. AppLovin's strategic focus on AI-driven solutions, combined with its strong presence in the mobile gaming market, positions the company for long-term success. Given the stock's overvaluation, new investors may have to wait for a more favorable entry point. Other growth-oriented investors would be better off holding the stock right now.
Overall, Wall Street rates APP stock a “moderate buy.” Of the 19 analysts covering APP stock, 14 have rated it a “strong buy,” four suggest a "hold,” and one rates it a “strong sell.”
APP stock has surpassed its mean price target of $216.75. However, the stock could rally by another 16.5%, based on the high price estimate of $385.
#3. AST Spacemobile
Valued at $7.04 billion, AST Spacemobile is working to provide broadband connectivity directly to standard mobile phones via its satellite network. Its mission is to build the first space-based cellular broadband network. Despite being unprofitable, ASTS continues to attract attention due to its innovative technology and strategic partnerships.
The company's proprietary BlueWalker and BlueBird satellites are designed to communicate directly with mobile devices, allowing for seamless broadband coverage even in the most remote locations.
The recently reported Q3 loss of $1.10 per share was larger than expected. Nonetheless, this should not concern long-term investors, because it demonstrates the company's commitment to R&D, manufacturing, and deployment initiatives. Adjusted operating expenses totaled $45.3 million in the quarter.
While still in the pre-revenue stage, AST is on track with its launch services agreements to launch approximately 60 Block 2 BlueBird satellites in 2025 and 2026. AST's cash, cash equivalents, and restricted cash totaled $518.9 million at the end of the third quarter.
The global need for reliable mobile broadband is immense, with billions of people lacking consistent internet access, which makes AST an appealing long-term investment prospect. However, the company is still in its early stages. The high-risk nature of its operations and financial requirements necessitates careful consideration before buying the stock.
Overall, on Wall Street, the stock is a “strong buy.” Its mean price target of $43.67 suggests the stock can rally another 82.5% from current levels. Plus, analysts expect it to surge by 162.8% based on its high price estimate of $63.
