Palantir, Dell shares rise on S&P 500 nods - and here's what might come next

By Emily Bary

After the index change takes hold, 'large-cap funds that are benchmarked against the S&P 500 will be forced to look at' Dell, one analyst says

Dell Technologies Inc. and Palantir Technologies Inc. shares are each rising sharply in Monday's premarket action after it was announced at the end of last week that the companies won inclusion into the S&P 500.

But analysts see further gains for both stocks as the index inclusion, which becomes official Sept. 23, could make investors take the technology names more seriously.

Dell's (DELL) future entry into the index "is incrementally positive as it would drive more focus on the name," Evercore ISI analyst Amit Daryanani said in a note to clients.

That's even as Dell is unlikely to have a sizable weighting in the index. Since Michael Dell owns about 63% of the company, Daryanani thinks Dell might command a 0.1% weighting in the index, which he said looks at the total amount of float available rather than a company's overall market capitalization.

"While this will help drive demand for $1.7 trillion of assets that are tied to the S&P 500, the bigger driver here will be large-cap funds that are benchmarked against the S&P 500 will be forced to look at it, and crucially, the risk of not owning this while it's in a peer benchmark would be higher going forward," he continued.

Still, Dell will need to focus on instilling confidence in business progress. Namely, investors want to see "SIZABLE revenue acceleration and margin expansion" in the second half of 2025 and onward," according to Daryanani, who rates the stock at outperform with a $140 target price.

Dell shares are up more than 5% in premarket trading Monday, while Palantir's stock (PLTR) is ahead more than 8%.

See also: Dell's stock gets a boost as earnings show huge growth in AI servers

Meanwhile, Wedbush's Dan Ives said that the S&P 500 SPX nod is validating for Palantir.

"In a nutshell, getting added to the S&P 500 Index is an important moment in the Palantir story that we believe marks a new era of enterprise growth and profitability over the next few years," he wrote.

Palantir is a controversial name on Wall Street, and Ives said that "many skeptics of Palantir have underestimated the profitability and cash-flow potential" of the company. However, he's upbeat about the company's Artificial Intelligence Platform, also known as AIP, which has helped the commercial business and is poised to pick up more steam in the federal channel going forward, from his perspective.

"We believe this is the start of a multi-year cycle for [Palantir] to continue generating significant deal flow on the back of AIP as more organizations look to add AI capabilities that provide value and innovation in real time across operations that are unique to each enterprise," Ives said.

Ives rates shares at outperform with a $38 target price.

Read: As Palantir bulls see a 'validation moment,' the bears are still cautious

-Emily Bary

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09-09-24 0802ET

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