Palantir vs. Tesla: Which Growth Stock is a Better Buy Right Now?

Growth stocks often represent companies at the forefront of innovation, delivering explosive revenue and market share gains in fast-growing industries. These stocks attract investors seeking significant upside, fueled by game-changing technologies and robust demand. That said, two of the hottest growth stocks on the radar today are Tesla, Inc. (TSLA) and Palantir Technologies Inc. (PLTR), both surging on the back of their unique strengths and powerful catalysts.

While Tesla, the electric vehicle (EV) titan, struggled earlier this year, its latest earnings report and a game-changing patent in autonomous driving (AV) technology have turned the tide for the Elon Musk-led company. Adding to the optimism is, of course, Donald Trump’s election win, which ignited massive enthusiasm toward the EV stock, sending its market cap soaring beyond $1 trillion. 

Palantir, on the other hand, has been leveraging its expertise in artificial intelligence (AI) and data analytics to redefine enterprise operations. The launch of its Artificial Intelligence Platform (AIP) has driven rapid growth, enabling businesses to tackle real-world challenges like supply chain disruptions and production inefficiencies.

Plus, the company grabbed massive attention from investors earlier this month after its latest rosier-than-expected earnings showed strong momentum in U.S. commercial revenue and customer count. Adding to the excitement, the prospect of an AI-driven push by the new administration and a potential Nasdaq-100 inclusion have investors buzzing about Palantir’s potential. 

So, as both TSLA and PLTR continue to soar, which of these two names might be a better investment candidate for your portfolio now? Let’s take a closer look to find out.

The Case for Tesla Stock

Austin-based Tesla, Inc. (TSLA) has cemented its position as an EV powerhouse, propelled by the runaway success of its Model 3. Since its 2010 IPO, Tesla has grown into an industry juggernaut, and first hit a $1 trillion market cap in 2021 as it outpaced the combined value of legacy automakers. With renewed momentum following Trump’s election victory, the company’s market cap has revisited 2021 highs, currently at roughly $1.08 trillion.

Beyond EVs, Tesla is driving innovation across energy storage, automation, and robotics, solidifying its place as a trailblazer in multiple high-growth sectors. Shares of this EV giant are up 38.6% in 2024, blowing past the broader S&P 500 Index’s ($SPX)23.9% gain on a YTD basis.

From a valuation perspective, TSLA stock is now trading at 136.7 times forward earnings, which is not only a premium to some of its “Magnificent Seven” peers but also its own five-year average of 113.7x.

While Trump’s victory has become a quite major growth catalyst for Tesla, with Elon Musk being one of the former president's most vocal supporters on the campaign trail, it wasn’t just the election that fueled the rally. Tesla’s Q3 earnings results sparked a 21.9% surge on Oct. 24, marking the stock’s best day in a decade.

Tesla’s Q3 results impressed Wall Street, even as revenue fell short of expectations. Revenue hit $25.2 billion, marking an 8% year-over-year rise, driven by its Automotive and Energy Generation segments. Automotive revenue was up 2% year over year, while the Energy Generation segment demonstrated a remarkable 52% annual growth, underscoring Tesla’s expanding footprint in clean energy. Adjusted EPS of $0.72 exceeded Wall Street’s forecasts, up 9% annually.

In the latest quarter, Tesla ramped up production, manufacturing 469,796 vehicles, a 9% jump from the previous year. With strong demand driving deliveries, the company also saw 462,890 vehicles reach customers, marking a solid 6% increase year over year. Plus, during Tesla's Q3 earnings call, CEO Elon Musk shared ambitious predictions, including the Cybercab robotaxi reaching volume production by 2026.

On Nov. 11, Wedbush Securities raised its price target on the stock to $400 following the recent U.S. election developments. Analyst Dan Ives and his team believe that Trump’s victory will serve as a "game changer" for Tesla’s AI and autonomous vehicle ambitions.

Ives estimates that the AI and autonomous opportunity alone could be worth $1 trillion for Tesla, with the new Trump administration expected to fast-track these key initiatives. The firm anticipates that under a Trump-led White House, the regulatory challenges Tesla has faced around Full Self-Driving (FSD) will be significantly eased, opening the door for accelerated progress.

Overall, Wall Street is still cautious about TSLA stock, with a consensus “Hold” rating. Of the 38 analysts offering recommendations, 10 advise a “Strong Buy,” two give a “Moderate Buy,” 17 believe it’s a “Hold,” and the remaining nine suggest a “Strong Sell.”

TSLA is trading at a premium to its average analyst price of $225.93, while Wedbush’s Street-high target of $400 suggests that the stock can still climb as much as 15.6% from current price levels.

The Case for Palantir Stock

Founded in 2003, Denver-based Palantir Technologies Inc. (PLTR) has become a leader in creating powerful software platforms designed for intelligence analysis and operational planning. Palantir has become a trusted partner for the government, military, and major enterprises, and has taken the market by storm this year, thanks to strong revenue growth and profitability alongside its recent inclusion in the SPX.

Shares of Palantir have skyrocketed an astonishing 262.8% this year, far outpacing the broader market’s gains. With its market cap now hitting $139.5 billion, Palantir has even surpassed the legendary defense contractor Lockheed Martin (LMT), whose market cap stands at $125.8 billion. 

PLTR stock is priced at a lofty 161.7 times forward adjusted earnings, which looks expensive even in comparison to its own notoriously rich five-year average earnings multiple of 119.75x.

After its Q3 earnings results beat expectations, PLTR stock soared 23.5% on Nov. 5. Revenue surged an impressive 30% year over year to $725.5 million, while its adjusted EPS of $0.10 improved 42.9% annually, beating Wall Street's forecast by 10%.

During the quarter, Palantir reported a 44% year-over-year jump in U.S. revenue, reaching a total of $499 million. U.S. commercial revenue soared by 54% annually, hitting $179 million, while government revenue was up 40% year over year to $320 million. The company’s impressive momentum continued with the closure of 104 deals valued at over $1 million, further fueling its expansion.

Palantir’s customer base grew by 39% year over year, underscoring the company’s strong market traction and increasing demand for its innovative AI data solutions. The company generated $420 million in cash from operations, yielding an impressive 58% margin. Additionally, Palantir’s adjusted free cash flow soared to $435 million, translating to a 60% margin. Palantir wrapped up the quarter with $4.6 billion in cash, cash equivalents, and short-term U.S. Treasury securities. 

For fiscal 2024, management raised its revenue guidance to a range between $2.805 billion and $2.809 billion. The company also upped its U.S. commercial revenue forecast to exceed $687 million, reflecting a robust growth rate of at least 50%. 

After earnings, Wedbush raised its price target for the company to $57 from $45 and maintained an “Outperform” rating, with analysts led by Daniel Ives noting that AIP received unprecedented demand as more enterprises embrace the company’s full product suite. 

Similar to TSLA, Wall Street is also cautious about PLTR stock, with a consensus “Hold” rating overall. Of the 15 analysts in coverage, two advise a “Strong Buy,” six maintain a “Hold,” two recommend a “Moderate Sell,” and the remaining five suggest a “Strong Sell.”

PLTR trades at a premium to its average price target of $33.78, as well as Wedbush’s Street-high target of $57.

TSLA vs. PLTR: Which Growth Stock is a Better Buy?

Both Tesla and Palantir have electrified the markets, delivering jaw-dropping rallies after their latest blockbuster quarterly results. Tesla, the trailblazer in EVs and clean energy, and Palantir, the frontrunner in AI-powered enterprise solutions, are seizing transformative opportunities in their respective fields, making them standout stocks in the growth stock arena.

However, the price tag for these growth stories isn’t cheap. Tesla commands a significant premium - but Palantir takes it even a step further with its eye-watering multiple, reflecting the intense investor enthusiasm surrounding its AI-driven potential.

At these prices, both stocks are best reserved for bulls who genuinely believe in the long-term growth story for each company, and who are willing to ride out the volatility that comes with these parabolic price moves. That said, for investors who are truly on the fence, it’s worth pointing out that Tesla faces higher operating costs and margin pressures as an automaker than Palantir, which benefits from an asset-light model.