Investing
- These stocks have performed very well in recent years.
- The underlying businesses are growing fast, expected to benefit from AI, like Palantir.
- These are more sustainable bets that you can buy at lower multiples compared to PLTR stock.
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Palantir (NASDAQ:PLTR) is Wall Street’s latest darling, and it could end up being the greatest if it continues on this trajectory. Analysts are betting it could cross the $1 trillion mark, and perhaps beyond. This is not an improbable scenario, considering Palantir is a multi-faceted bet on the defense tech industry, politics, and AI in the commercial sector.
The company is landing contract after contract and is managing to do so while running a tight ship. CEO Alex Karp is increasing revenue growth while planning to shed workers, something that is almost unheard of anywhere else. Thanks to AI, this is possible as Palantir automates its software upkeep and moves on to the next contract.
The company looks perfect. Likewise, PLTR stock is also priced for perfection, and you need to hold your horses. Can Palantir double, triple, or even quadruple from here? Sure. Should you dump your portfolio into this one stock that trades at 192 times forward 2025 cash flow? Not at all.
I’d maintain some exposure, but also invest in top-performing competitors and alternatives. Here are three to look into:
Climb Global Solutions (CLMB)
Climb Global Solutions (NASDAQ:CLMB) is a little-known company that sells software, hardware, and products related to cloud services plus data centers. The company’s stock has lived up to its name and has climbed over 415% over the past five years, with momentum only accelerating. Market capitalization is at $566.7 million, so it remains mostly undiscovered.
Revenue grew almost 73% year-over-year in Q2 to $159.28 million, beating estimates by 40.28%. More impressively, this company is profitable already, with net income rising by almost 74% year-over-year to $5.97 million. EPS beat estimates by 54.44% in Q2.
If that wasn’t enough, CLMB stock also comes with a 0.55% dividend yield.
The ongoing expansion of data centers and cloud tech, along with demand from the education sector, could push it well beyond a $1 billion valuation if management can sustain this growth and keep landing contracts.
CACI International (CACI)
CACI International (NYSE:CACI) is a more mature pick and more “Palantir-like” as it services the Federal government. Around 95% of its revenue is tied to it, with a majority of that coming from the Department of Defense.
CACI stock has more than doubled over the past five years, outperforming both the Nasdaq-100 and the S&P 500. There was a scare this spring surrounding a reduction in government contracts, but the stock quickly rebounded as it turned out that the administration is instead looking to spend more. Trump proposed earmarking $1.01 trillion towards defense.
CACI should continue on its current trajectory and deliver solid gains over the long run. Q2 revenue grew by 13% year-over-year to $2.3 billion, beating estimates by 0.38%. EPS grew by 19.4%.
Tyler Technologies (TYL)
Tyler Technologies (NYSE:TYL) sells public sector software. These software products cover everything from taxes, appraisal, data, justice, to school transportation. Software usage in the public sector is gaining steam, and Tyler has been a major beneficiary of that trend. AI and automation are also being used to increase margins.
TYL stock hasn’t done as well as the other stocks in this list, but it is a safe long-term bet on public sector software. The revenue is sticky and recurring, and growing at double digits. Q2 revenue grew 10.19% year-over-year to $596.12 million and beat estimates by 1.45%. EPS grew 22.93% year-over-year, with analysts expecting 19% EPS growth for all of 2025. Revenue is expected to grow by 9% to 10% annually for the foreseeable future.
The growth outlook looks like an underestimate due to multiple public sectors aggressively infusing their operations with software and AI. Tyler Technologies has a wide range of solutions for them and can capture these tailwinds.
Analysts have a $688.3 consensus price target over the next 12 months, implying 23.8% upside potential. Targets go as high as $775.
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