Palantir (NASDAQ:PLTR) stock has quietly outshined Nvidia (NASDAQ:NVDA) as Wall Street’s most explosive AI play. While Nvidia shares surged 590% over the past three years, Palantir delivered a huge 1,450% gain over the same stretch.
That rally hit a brief speed bump after Q1 2025 earnings, as investors took profits in a classic ‘sell the news’ move. But the numbers themselves were anything but disappointing – Palantir reported $883.85 million in revenue, up 39.3% year-over-year and a solid $21.7 million above estimates. Earnings per share landed right on target at $0.13, marking a 62.5% jump from last year’s bottom line.
It wasn’t just Palantir’s past performance that impressed – the company’s Q2 revenue outlook, ranging from $934 to $938 million, also topped the Street’s $899.12 million forecast.
But as the saying goes, “The higher you climb, the thinner the air” – and the biggest knock against Palantir stock remains its hefty valuation.
That is the reason top investor Jonathan Weber is not ready to climb aboard, despite yet another quarter containing “excellent results.”
“While PLTR surely deserves a premium valuation compared to the average stock due to its much better growth, I believe that shares are very far from a bargain at north of 200x net profits,” explains Weber, who is among the top 2% of TipRanks’ stock pros.
As far as the company is concerned, Weber sees plenty of reasons for optimism. This includes revenue growth, with exceptionally strong U.S. commercial sales (71% growth year-over-year) serving as a particularly bright spot. This could get another boost going forward, notes Weber, if companies seek to stay a step ahead of the Trump tariffs by onshoring their production.
“More companies would have reasons to invest in PLTR’s software to optimize their new U.S. manufacturing operations,” adds Weber.
The investor does not envision too many risks standing in the way of Palantir’s future growth, as the company’s government sales and long-term commercial contracts should allow the firm to weather any recession.
But again, the biggest risk for investors is PLTR’s high multiple of 220x expected net earnings. And while Weber doesn’t see an immediate trigger for multiple contraction, he warns that at such lofty levels, any slip could turn into a costly fall.
“The pros (great business growth performance) and cons (a very elevated valuation) offset each other,” concludes the investor, who is assigning PLTR shares a Hold (i.e. Neutral) rating. (To watch Weber’s track record, click here)
Wall Street seems to echo that cautious stance. With 3 Buy, 11 Hold, and 4 Sell recommendations, PLTR has a consensus Hold (i.e. Neutral) rating. The average 12-month price target stands at $98.56 – nearly 15% below current levels. (See PLTR stock forecast)
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Disclaimer: The opinions expressed in this article are solely those of the featured investor. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.