Lineage Investors Seek Signs of Growth From Earnings After Rout
Shares of the cold-storage real estate investment trust have tumbled 30% since it went public last July as Wall Street continues to wait for management to make good on its promises. By contrast, Lineage has underperformed its industrial REIT peers, with the S&P Composite 1500 Equity REITs index gaining 3.5% in that same period.
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Palantir Technologies (PLTR) Shows the Skeptics Who's Boss
Palantir Technologies (PLTR) is one of the most talked-about stocks in America right now—and it's no surprise, given it's the top performer in the S&P 500 (SPX) this year, up more than 140% so far and ~522% over the past twelve months. That kind of run reflects a business that's establishing a pseudo-monopoly in AI software before our very eyes — something competitors have found incredibly hard to replicate. According to price action data, PLTR diverged from the S&P in April this year, and the stock has not looked back since. Elevate Your Investing Strategy: Take advantage of TipRanks Premium at 50% off! Unlock powerful investing tools, advanced data, and expert analyst insights to help you invest with confidence. Being at the center of powerful, long-term AI tailwinds has led to a streak of quarterly results that consistently beat expectations, along with steady upward revisions in guidance. It's become a rare example of a company growing at breakneck speed while also expanding margins to impressive levels. Yes, all of this comes with a price tag that would make any value investor balk—and insider selling, along with reduced institutional exposure, shows that not everyone is comfortable buying in at these highs. But I don't see any current weakness that suggests the bullish momentum is fading. The market clearly sees Palantir as a transformational opportunity. With that in mind, a Buy rating for PLTR still seems reasonable—despite valuation risks—since market skeptics are too focused on price and have overlooked the broader opportunity. How Palantir Earned Its Spot Among the Elite There's no other company in the software or AI space currently matching Palantir's rare combination of 48% revenue growth and 46% operating margins. Unsurprisingly, that kind of performance commands a steep premium: 326x earnings and 116x sales—roughly ten times above sector averages. Naturally, many investors are left scratching their heads, questioning how the company delivers such numbers and whether the sky-high multiples are even remotely justified. However, combining Palantir's most recent revenue growth and operating margin results in a Rule of 40 score of 94%—well above the 40% benchmark typically seen as healthy for high-growth software companies. That kind of metric isn't easy to find. In fact, among software names, only Fair Isaac (FICO) and Intuit (INTU) come close, with Rule of 40 scores of 69% and 77%, respectively. And when you broaden the lens to include the 25 largest companies globally by market cap, only Nvidia (NVDA) comes out ahead at 122%, followed by Eli Lilly (LLY) at 89% and TSMC (TSM) at 88%. So when Palantir posts the highest Rule of 40 in its peer group, it's not just an arbitrary stat—it highlights a company that's scaling incredibly fast while being highly profitable, which helps explain why the market is assigning it such a premium valuation. In other words, the firm sets highly ambitious targets that beguile belief, only to deliver above and beyond their initial expectations, which simply leads to incredulity. The Moat Investors Don't See Although Palantir's bullish thesis often highlights its unmatched AI software, I believe there's still a lot of misunderstanding around how the company actually maintains its moat. For example, CEO Alex Karp frequently uses highly technical rhetoric, emphasizing the concept of 'ontology.' In Palantir's context, ontology refers to the data model layer that organizes and maps all of an organization's data, processes, and relationships into a single, unified, operationally meaningful structure. For instance, for clients like Citigroup (C), the onboarding process was cut from nine days to seconds. For Fannie Mae (FNMA), fraud detection went from two months to seconds. These improvements translate into millions in cost savings, and it's no surprise that total RPOs have grown 76.6% year-over-year, now totaling $2.42 billion. Palantir's revenue comes from a mix of development, which is a one-time fee, and software usage through licenses and subscriptions, which generate recurring revenue. While the company doesn't publicly break down exact dollar amounts per contract for development versus recurring fees, a reasonable estimate is that in, say, a $10 million enterprise contract, roughly a quarter is charged as an integration fee (paid upfront or in milestones), with the remainder billed as recurring software fees over a more extended period, such as five years. This model allows Palantir to achieve extremely high margins thanks to recurring, high-value software revenue and a scalable delivery setup—a key reason why the company performs so well under the Rule of 40. Institutional Skepticism and the Price of Hype There are two caveats in my bullish thesis. First, for whatever reason, institutional investors don't seem nearly as excited about the stock as retail investors. Not only have insiders refrained from buying —selling $97.3 million worth of shares over the past three months—but hedge funds have also been cutting their exposure, signaling hesitation to back a company trading at eyebrow-raising valuations. To me, Palantir stock feels like a game of musical chairs. The momentum might keep things going for a while, but when the music stops, investors could be stuck holding shares bought at sky-high multiples—just like what happened between early 2021 and late 2022, when the stock dropped as much as 80%. Of course, this is speculative—after all, trying to justify a P/E that dwarfs the sector average is like guessing when the music will stop. Is PLTR a Strong Buy? Even after multiple price target hikes following the Q2 results, Wall Street still seems pretty skeptical on PLTR. Of the 16 analysts covering the stock over the past three months, only four are bullish, while 13 are neutral, and two are bearish. PLTR's average stock price target is $152.12, implying ~16.5% downside from the current share price. Palantir's Bullish Case Holds Firm Palantir might be the clearest recent case of the market front-running fundamentals and counting its chickens early, with valuation multiples that would make most value investors flinch. For now, though, the stock seems to be holding strong—backed by impressive metrics like a Rule of 40 score of 94%, consistent earnings beats, and steady upward revisions to guidance. At this pace, all signs point to Palantir eventually making a run at the trillion-dollar market cap club. While an eventual correction may be inevitable, I don't see any cracks yet that suggest it's coming soon. I still view Palantir as a transformational opportunity—and I think the bears who stayed bearish all the way from $6 in late 2022 to now missed the bigger picture, and probably will keep missing out. Even with the valuation risk, I believe Palantir deserves a Buy rating—at least as a small chunk of a balanced portfolio.
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Caterpillar's (CAT) Q2 Bombshell Fails to Deter Bullish Investors
Caterpillar (CAT) stock has been on quite a run in the past three months due to strong underlying demand. However, trouble is brewing after the construction equipment manufacturer reported its second-quarter 2025 earnings. The headline-grabbing element of the report was management's warning that new tariffs could result in a $1.3 billion to $1.5 billion headwind to profitability for the full year 2025. Elevate Your Investing Strategy: Take advantage of TipRanks Premium at 50% off! Unlock powerful investing tools, advanced data, and expert analyst insights to help you invest with confidence. Moreover, the company fell short of EPS, revenue, and operating profit expectations. Caterpillar has been dealing with profitability issues for quite some time, so the ongoing tariff regime could not have come at a worse time. Despite these headwinds, Caterpillar's booming Energy & Transportation (E&T) segment, which has an interesting connection to artificial intelligence (AI), and its place on the S&P 500 Dividend Aristocrats Index make me Bullish on the stock in the medium-long term. CAT's Cyclical Nature Spells Opportunity To understand Caterpillar's current state, context is key. The company is a quintessential cyclical investment, meaning that its business and stock are highly influenced by macroeconomic factors (e.g., construction and mining activity decline significantly during a recession). With that said, Caterpillar has been actively working to diversify its business, seeking less-cyclical revenue streams. While construction remains its core business, Caterpillar's E&T segment is quickly gaining steam. AI's Surprising Role in Powering Caterpillar It may be a surprise, but even Caterpillar has a connection to AI. Its E&T segment growth is directly linked to the booming demand for reciprocating engines and power generation solutions for data centers. Hyperscalers like Meta (META) and Alphabet (GOOGL) are investing tens of billions of dollars into AI infrastructure. Caterpillar's reciprocating engines help power these data centers. In Q2, its E&T segment generated $7.8 billion in sales (up 7% year-over-year) and $1.6 billion in profit (up 4%). Critically, this segment is offsetting some weakness in Caterpillar's Construction Industries and Resource Industries (serving mining and quarry sectors) segments. Segmental Pressures and Industry-Wide Headwinds CAT's Construction and Resource Industries segments, in particular, saw substantial ~30% decreases in profit. Unfavorable manufacturing costs are being cited as key factors, and these issues are not unique to Caterpillar in the industrial machinery sector. John Deere's Construction & Forestry segment fared even worse, experiencing a 43% drop in operating profit in Q2 2025. Elsewhere, CAt's financial products segment maintains steady growth, with increased retail credit applications. Although tariff and economic uncertainties pose risks, CAT's management has assured the market that its operational focus and backlog strength will be enough regardless of market conditions. Navigating Tariffs with a Record Backlog Rubbing salt in the wound, Caterpillar revealed that tariffs will result in between $1.3 billion and $1.5 billion in costs this year, further impacting its bottom line. The company is implementing several strategies to combat this risk. Meanwhile, Caterpillar's backlog reached an all-time high of $37.5 billion, representing 10% year-over-year growth in orders. Amid macroeconomic uncertainty, this gives Caterpillar some visibility into future revenue. Moreover, Caterpillar's balance sheet provides a solid buffer to short-term disruptions, featuring $5.44 billion in cash and zero debt. Assessing Valuation and Shareholder Returns As noted earlier, Caterpillar's (CAT) valuation has edged higher, with its P/E ratio now at 22.1—about a 6% premium to the Industrials sector median of 20.85. This comes despite trailing 12-month revenue growth of -4.87%, well below the sector median of 3.29%. The premium suggests the market is betting on a near-term rebound in growth. Even if CAT underperforms amid the anticipated profit compression in the year's second half, shareholders can still count on a robust quarterly dividend of $1.51 per share. Is CAT Stock a Good Buy Now? On Wall Street, CAT sports a consensus Moderate Buy rating based on eight Buy, five Hold, and one Sell ratings in the past three months. CAT's average stock price target of $447.36 implies an upside potential of 7.25% over the next twelve months. Last month, analyst Kristen Owen of Oppenheimer assigned CAT a Buy rating and raised her price target from $395 to $483. She expressed optimism, noting that 'Temporary reprieves on tariffs likely support Q2 margin upside for the majority of stocks under coverage, along with demand pull-forward for select names. Prospectively, while trade negotiations remain fluid, the firm sees signs of the industrial cycle bottoming.' CAT Bulls Stay in Charge Despite Short-Term Pain Caterpillar's Q2 results were a mixed bag, with strong underlying demand offset by significant, externally driven margin pressures. The outlook for the second half of 2025 remains challenging as profitability is expected to tighten further. Like many peers, Caterpillar is taking a wait-and-see approach on tariffs, though it retains some flexibility in sourcing and backlog repricing if tariffs persist. When looking at CAT's price history since 2022, the stock appears to be on a fairly steady uptrend. However, if looking at the past five days, it would seem the sky is falling. Given the fundamentals of the stock, buying the dip is a compelling idea. If trade conditions ease, the company's record $37.5 billion backlog—bolstered by growth in the E&T segment—positions it well for continued activity and potential tailwinds in 2026. Overall, Caterpillar appears more resilient than many competitors, and I share Oppenheimer's bullish view despite near-term headwinds.
