Opportunity knocks, even when it sounds like the thud of a stock dropping down a flight of stairs. Shares of Palantir (PLTR) and MercadoLibre (MELI) have been market beaters until their recent pullbacks, down 38% and 33% from their 52-week highs, respectively.
They have still delivered huge gains for long-term investors. Palantir is a 15-bagger over just the past three years. You have to zoom out a bit more, but MercadoLibre is a 15-bagger over the past 10 years. If you believe their longer track records of upticks are a better indicator of future returns than the recent downticks — as I do — this could be a good time to establish or reestablish a position in these two monster stocks.
1. Palantir
The last time I wrote about Palantir was late last year, when shares of the analytics software provider were on the way to more than doubling for the third consecutive year. “Palantir isn’t going to come to you,” I argued. I was wrong.
Palantir has corrected. It’s hard to see the pullback lasting much longer. The stock isn’t cheap — and I’ll get to that shortly — but check out the growth. Palantir has seen its revenue growth accelerate sharply in back-to-back years, going from 17% in 2023 to 29% and 56% in subsequent years.
The stock’s sharp slide since peaking five months ago might suggest the business is slowing, but that’s not the case. Analysts expect revenue to surge 62% in 2026.
Palantir’s claim to fame has been its success in crunching big data to deliver better outcomes for human-guided military and other defense decisions. The popularity of its AI-powered automation solutions have broken out into the private sector. If you think Palantir’s acceleration is impressive, it’s growing even faster on the commercial end with actual businesses.
Palantir is expensive even after shedding more than a third of its value in the past five months. Palantir stock is trading for 97 times this year’s adjusted earnings and 69 times next year’s profit target. It may also have a polarizing political bent. However, companies with an accelerating business — even at a lofty market cap north of $300 billion — don’t stay down for long.
2. MercadoLibre
MercadoLibre stock is relatively cheaper than Palantir, fetching 35 times forward earnings and 25 times next year’s analyst estimates. It’s also growing at a slower pace, though the 39% top-line increase it posted last year is still impressive.
MercadoLibre has decades of leadership experience in Latin America’s e-commerce and fintech markets, industries that are still early in their regional growth trajectories. Net income grew at a much slower pace last year. Margins are being squeezed, with MercadoLibre lowering its order minimums for free shipping in Brazil, a sign of the competitive times in that country.
Another knock on MercadoLibre is that it has missed Wall Street’s profit targets in each of the past three quarters. It’s not an ideal trend, but that margin setback should be temporary. Winners keep winning, and MercadoLibre has a long track record of success.
— Rick Munarriz
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Source: The Motley Fool
