What's the hottest S&P 500 stock of 2024? Palantir Technologies (NASDAQ: PLTR) is the hands-down winner. Shares of the artificial intelligence (AI) and data analytics software provider have skyrocketed more than 320% year to date.
Thanks to this impressive performance, Palantir's market cap now hovers around $165 billion. But I suspect Palantir's momentum could soon wane. Here are two stocks I predict will be worth more than Palantir five years from now.
Bigger now, bigger in the future
Intuitive Surgical (NASDAQ: ISRG) might seem to be a pick that's too easy to make. The robotic surgical-systems maker already sports a market cap of around $194 billion, well above Palantir's market cap. But I think Intuitive Surgical isn't just bigger than Palantir now; I predict it will be bigger in the future, too.
This stock has been on quite a roll in 2024, although its performance hasn't been in the same league as Palantir's. Intuitive's da Vinci surgical system installed base increased 15% year over year in the third quarter of 2024. Its procedure volume jumped 18%. More installed systems plus more procedures add up to strong revenue and earnings growth for the company.
Intuitive Surgical should continue to enjoy growth for years to come thanks to an important demographic tailwind. Populations are aging in the U.S. and in many other countries around the world. As people age, they're more likely to require surgery. This should translate to accelerated procedure volume growth for da Vinci.
Around 2.2 million procedures were performed with da Vinci in 2023. Intuitive Surgical estimates roughly 7 million procedures are performed each year where it already has products and clearances. However, three times that number of soft tissue surgeries are performed annually. This presents a huge opportunity for the company.
The biggest knock against Intuitive Surgical is its valuation. Shares of the robotic surgical-systems leader trade at around 69 times forward earnings. Compared to Palantir's forward earnings multiple of 161, though, Intuitive Surgical looks cheap.
A contrarian call
You might think I'm crazy, but I also predict that Pfizer (NYSE: PFE) will be worth more than Palantir five years from now. The drugmaker's current market cap of $145 billion is well below Palantir's. Pfizer stock is down this year when many stocks have soared. So what's my logic behind this contrarian call?
My view is that Pfizer is one of the most underrated stocks around, while Palantir is arguably overrated. Its shares trade at only 8.6 times forward earnings. That's half the size of the average S&P 500 healthcare stock's forward earnings multiple. Pfizer's price-to-earnings-to-growth (PEG) ratio based on five-year earnings growth projections is a super-low 0.18, according to financial-markets infrastructure and data provider LSEG.
Sure, Pfizer is cheap for a reason. The company's COVID-19 product revenue has sunk like a brick since the peak of the pandemic. Pfizer faces the loss of patent exclusivity for multiple blockbuster drugs. Some investors are concerned about what could be in store for the drugmaker in a second Trump administration.
However, Pfizer put much of its COVID-19-fueled cash stockpile to good use bolstering its product lineup and pipeline. The company has several new products resulting from acquisitions that are key growth drivers, including migraine therapy Nurtec ODT and cancer drugs Adcetris, Padcev, and Tukysa. Pfizer's internal research and development (R&D) is also paying off, with respiratory syncytial virus vaccine Abrysvo's 53% market share a case in point.
Meanwhile, Pfizer offers one of the most attractive dividends in the healthcare sector (or any other sector, for that matter). Its forward dividend yield tops 6.7%. Pfizer's management consistently ranks maintaining and growing the dividend as one of the company's top capital-allocation priorities.
This pharma stock isn't as sexy as Palantir. My hunch, though, is that investors will see Pfizer in a more favorable light over the next five years as it delivers stronger growth than expected. Maybe I'll be proven wrong, but I think Pfizer has a shot (no pun intended) at becoming a bigger company than Palantir by the end of the decade.
Keith Speights has positions in Intuitive Surgical and Pfizer. The Motley Fool has positions in and recommends Intuitive Surgical, Palantir Technologies, and Pfizer. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
