This Dirt Cheap Stock Is Up 262% This Year. Could It Be the Next Palantir?

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Over the last year, I’ve noticed an exhilarating surge in interest towards Palantir Technologies (PLTR), a company specializing in AI-driven data analytics. Remarkably, their stock value has escalated by over 440%, reaching unprecedented heights. This growth spurt is reflected in their astounding price-to-earnings ratio of approximately 700, a figure that seems almost hard to believe.

Essentially, Palantir leverages artificial intelligence to deliver exclusive, tailored services, providing genuine value that customers are ready to invest in. It has built a resilient platform with ample room for expansion within a specialized market, and the high hurdles for competition make it an appealing prospect for investors, even with its substantial valuation.

It’s questionable if Palantir is the best investment choice at this moment, but if you come across another promising stock that leverages AI for developing unique technology, exhibits rapid expansion, and offers a massive potential, yet remains affordable, it might be wiser to consider investing in it. Could Pagaya Technologies (PGY) be the one you’re looking for?

The AI lending solution

Pagaya is an AI-driven loan service which evaluates consumer credit based on multiple data factors, leading to increased approval chances for borrowers. This platform operates as a two-pronged approach, linking lenders and financing resources. By pooling their loans together, it creates asset-backed securities (ABS) that are then sold to its institutional investors.

Pagaya boasts an impressive roster of lending associates, which includes reputable companies such as Visa, SoFi Technologies, and U.S. Bancorp. They’ve just finalized their initial buy now, pay later agreement with Klarna, under a new label they call POSH (point-of-sale holdings). This product is designed to seamlessly integrate with existing POS systems, allowing for quicker approvals of purchases and focusing on consumers with credit scores in the 600 range, who typically have lower ratings.

In this scenario, Pagaya utilizes its advanced AI system to assess potential borrowers using a broader set of criteria than traditional credit scores. Consequently, they can approve more loans and transactions, all while maintaining a stable risk level for the lender. The initial deal under the POSH (Pagaya Offshore Securitization) platform is valued at $300 million and boasts an exceptional AAA credit rating. This transaction involves 20 distinct investors.

In the year 2025, Pagaya has successfully closed ABS deals worth approximately $2.8 billion, and they’ve managed to secure $1 billion in funding for their POSH product. The company’s leadership views the ‘buy now, pay later’ segment, which is believed to have accounted for around 8% of holiday shopping in the previous year (as per Adobe’s estimates), as a significant growth opportunity for their business.

Strong performance in a tough environment

Since its initial public offering in 2022, Pagaya continues to perform exceptionally well, maintaining its positive trajectory. It is still experiencing significant, double-digit percentage growth in revenues, and remains profitable.

This year, the stock had been steadily climbing due to excitement about its operations, impressive first-quarter earnings, and its partnership with Klarna. However, it soared to even greater heights last week following the release of preliminary second-quarter results that exceeded predictions. As of July 23, it has risen an astounding 262% in 2021.

In the recent quarter, our revenue surpassed expectations, reaching an impressive $326 million compared to the projected maximum of $310 million. Additionally, network volume exceeded the top end of our projections, amounting to a substantial $2.6 billion rather than the anticipated $2.5 billion. Contrary to predictions suggesting a net income between zero and ten million dollars, we actually reported earnings of $17 million instead.

Opportunity or value trap?

Currently, the value of Pagaya stock is equivalent to a forward, one-year Price-Earnings (P/E) ratio of 11.2 and a Price-to-Sales ratio of 2.4. This is surprisingly affordable for a growth stock that boasts numerous opportunities.

It might seem like a good deal, but potential investors need to tread carefully as the market’s low pricing may not tell the whole story. Firstly, there’s an element of risk involved because Pagaya, being relatively new, is yet to turn a consistent profit. Even though it collaborates with established and reliable partners, some of its ABS loans directed towards lower-quality borrowers carry potential risks.

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It’s plausible that Pagaya could follow in Palantir’s footsteps. Similar to how Palantir focuses on data analytics, a market estimated to be worth around $70 billion last year by Grand View Research, Pagaya specializes in various types of loans, with an addressable market exceeding $800 billion. The company aims to become the leading technology partner for the consumer finance sector, which is a significant and expansive industry.

Investing in Pagaya may not suit those with a conservative approach, as it carries a higher risk. However, if you’re seeking opportunities with potential for significant growth and are comfortable with taking risks, Pagaya could be an exciting prospect.

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2025-07-25 13:42