AI firm Palantir Technologies (PLTR) has been on a remarkable run, with shares hitting another record high on Friday and total gains since its 2021 debut nearing 2,500%. The stock is up nearly 150% this year due to its growing use of artificial intelligence, strong relationships with the U.S. government, and an impressive earnings report. As a result, this surge has made Palantir one of the most expensive companies in the S&P 500 (SPY), trading at about 245 times its expected earnings, far higher than other big winners like Nvidia (NVDA), which trades at 35 times. As Morningstar’s Mark Giarelli told Bloomberg, Palantir is “a great company,” but its sky-high valuation “causes heartburn” for investors.
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Unsurprisingly, some analysts say that the numbers needed to justify this valuation are staggering. For example, Bloomberg Intelligence’s Damian Reimertz estimates that Palantir would have to generate $60 billion in revenue over the next year to trade at a valuation similar to its peers. That’s many times more than the $4 billion Wall Street expects in 2025 or the $5.7 billion forecast for 2026. Separately, DA Davidson’s five-star-rated Gil Luria stated that Palantir would require 50% yearly growth for the next five years, along with 50% profit margins, to bring its valuation down to levels seen in companies like Microsoft (MSFT).
While earnings are expected to grow 56% this year, growth rates are forecast to slow down to 31% and 33% in the following two years. Even with these challenges, many investors are holding onto the stock, unwilling to risk missing more gains. But history shows that stocks trading at lofty valuations can fall hard when results disappoint. For investors, Palantir’s situation is clear: its growth story is still strong, but the high price tag means that there is little room for error, thereby making future earnings reports especially important.
Is PLTR Stock a Buy?
Turning to Wall Street, analysts have a Hold consensus rating on PLTR stock based on five Buys, 13 Holds, and two Sells assigned in the past three months, as indicated by the graphic below. Furthermore, the average PLTR price target of $154.56 per share implies 17.1% downside risk.
