Palantir's AI-Driven Growth Sparks Debate on Valuation and Future Prospects

Will Recent Events Dent Palantir Technologies Stock 385% Growth? - Palantir Technologies (NASDAQ:PLTR)

Palantir Technologies PLTR stock surged 79% year-to-date, driven by quarterly earnings, a boost in government contract revenue, and positive analyst sentiment. Palantir has far outpaced the market indices. The S&P 500 and the Nasdaq-100 (which also includes Palantir) gained 7-9% during the period. Palantir stock gained over 385% in the last 12 months, compared to the indexes' 12-13% returns. Founded as a defense contractor, Palantir has since expanded to the private sector. Also Read: Palantir Just Teamed Up To Reinvent Nuclear Power: Here's What's At Stake In May, Palantir reported first-quarter revenue of $883.86 million, up 39% year over year and beating analyst estimates of $862.83 million. U.S. revenue grew 55% to $628 million. U.S. commercial revenue increased by 71% to $255 million, and U.S. government revenue rose by 45% to $373 million. Palantir's customer count grew 39% year-over-year and 8% quarter-over-quarter. The company closed 139 deals worth over $1 million during the quarter and 51 deals worth at least $5 million. Palantir expects second-quarter revenue of $934 million-$938 million versus estimates of $899.12 million. Palantir expects full-year 2025 revenue of $3.89 billion to $3.90 billion, up from analysts' expectations of $3.75 billion. Analyst Opinion Wedbush analyst Dan Ives expects Palantir to be a top winner in the AI boom, calling it the "Messi of AI." In the coming years, Ives projected that Palantir's stock could surpass $400 and reach a $1 trillion market cap. He stated that Palantir, alongside Nvidia Corp NVDA, is a key force driving the next phase of the AI revolution. Previously, Ives had reaffirmed Palantir as a top pick, citing the North Atlantic Treaty Organization deal as a key growth catalyst. He views the agreement as a strong validation of Palantir's expanding traction across federal and commercial sectors. Twenty-five analysts have set a consensus price target of $76.72 for Palantir. Loop Capital issued the highest target, $155, on June 12, 2025. Based on the latest analyst ratings, the average target of $128.67 suggests a potential downside of 3.98% from the current price. Recent Events Recently, Palantir collaborated with BlueForge Alliance on a Navy-backed initiative to digitize and speed up U.S. warship production. The company is also in talks to supply its technology to the Internal Revenue Service and Social Security Administration, further deepening government ties. Reportedly, Palantir has bagged over $113 million in contracts since Trump took office, excluding the $795 million DoD contract. However, it's not all rosy about Palantir. States accused the Trump administration of illegally sharing Medicaid recipients' health data with immigration authorities, bypassing federal privacy laws. California and other states alleged Palantir is helping the Department of Government Efficiency build a massive database of Americans' info for immigration enforcement. Officials warned that this data sharing could discourage eligible immigrants from enrolling in Medicaid, harming public health and straining state healthcare systems. Price Action: PLTR stock is up 1.62% at $136.53 at last check Monday. Read Next: Pony.ai To Deploy Robotaxis In Dubai, Trials Begin Late 2025 Photo via Shutterstock PLTRPalantir Technologies Inc$136.661.71%Stock Score Locked: Want to See it? Benzinga Rankings give you vital metrics on any stock - anytime. Reveal Full ScoreEdge RankingsMomentum98.93Growth97.34QualityNot AvailableValue2.67Price TrendShortMediumLongOverviewNVDANVIDIA Corp$157.90-0.90%Market News and Data brought to you by Benzinga APIs

Down 7%, Should You Buy the Dip on Palantir Technologies? | The Motley Fool

Is now the time to buy Palantir Technologies (PLTR -0.13%) stock? That's the question many investors have right now. True, as of this writing, shares of Palantir are only 7% off their all-time high, but there haven't been many opportunities to buy this stock on a dip. It's up more than 680% over the last year and a half. So, should investors leap at the opportunity to buy Palantir stock? Here's what I think. First, let's examine what's behind Palantir's incredible run. The company is one of the most prominent players in artificial intelligence (AI), and it is benefiting from the rapid acceleration of AI adoption -- both in the commercial and government sectors. Palantir's Gotham AI platform is favored by many of its governmental partners, including the American intelligence community and the Department of Defense. Meanwhile, Palantir's Foundry platform has gained traction among commercial clients, who use it to integrate and analyze data, perform simulations, and gain actionable insights that improve business outcomes. Indeed, Loop Capital recently lifted its price target for Palantir to $155, citing the company's early lead in the enterprise AI sector. Moreover, Loop also reasoned that Palantir will benefit as AI use cases grow across industries and businesses move AI systems into full production. Turning to Palantir's government segment, the company continues to land lucrative contracts. Recently, the company announced a strategic partnership with Accenture to train 1,000 Accenture professionals on Palantir's AIP and Foundry systems. In turn, they will help deploy Palantir systems for use in various federal government agencies to increase automation and drive efficiencies. Clearly, the bull case for Palantir remains strong. The company is riding a powerful secular trend, and its business momentum shows no sign of stopping. Indeed, the company's financials make it clear: Palantir's growth is real. In the company's most recent earnings report (for the three months ending on March 31), the company reported revenue growth of 39%. Net income for the quarter increased to $214 million. What's more, the company increased guidance. Management now expects full-year 2025 revenue to reach almost $4 billion. For context, Palantir generated less than $2 billion in revenue as recently as 2023. Adding to this financial strength, Palantir has a rock-solid balance sheet. The company boasts over $5 billion in cash and no net debt. As for cash flow, the company has generated over $1.3 billion in free cash flow over the last 12 months. That gives management the ability to keep growing the business without the need to raise capital. Nevertheless, there are risks to owning shares of Palantir. Most prominent, perhaps, is the stock's high valuation. Shares sport a gaudy price-to-sales (P/S) ratio of more than 100x. That's far above the market average, which is closer to 3x. Any earnings, revenue, or guidance miss could send Palantir shares tumbling. In addition, Palantir's government links are coming under increased scrutiny, with some lawmakers demanding that the company provide details on its work with agencies that handle highly sensitive citizen data, including the Social Security Administration and the Internal Revenue Service. All that said, the AI genie is not going back into the bottle. Government agencies, corporations, and nonprofit organizations are all racing to implement AI-powered systems because of the enormous benefits they offer. While Palantir stock remains volatile -- and isn't suitable for every investor or portfolio -- long-term growth investors would be wise to accumulate Palantir shares now, when its price has pulled back from recent highs.

Prediction: Palantir Has 4 Wall Street Sell Ratings, and This Figure Will More Than Double in the Coming Months | The Motley Fool

Wall Street's hottest artificial intelligence (AI) stock has gained 2,130% since 2023 began and now sports a truly history-making valuation premium. History has taught investors that being a long-term optimist is a smart decision. The analysts at Crestmont Research examined more than a century of rolling 20-year total returns, including dividends, for the benchmark S&P 500 and discovered that all 106 rolling 20-year periods they analyzed would have generated a positive annualized total return. This realization that the stock market's major indexes have a propensity to climb in value over time has led to an overwhelming "buy" bias for Wall Street analysts. According to data from FactSet Insight, there were 12,319 ratings on stocks in the S&P 500, as of late June. A whopping 56.4% of these ratings were the equivalent of "buy," 38.7% were "hold," and only 4.9% were the equivalent of "sell." Despite this buy bias on Wall Street, history also tells us that not all stocks climb in value, nor do they rise in a straight line when increasing in value over time. Although sell ratings are exceedingly rare, there's one high-flying stock, which has returned 2,130% since the end of 2022, that could be a sell rating magnet for Wall Street analysts in the coming months: Palantir Technologies (PLTR -0.33%). Based on analyst ratings aggregated by LSEG Data & Analytics (formerly Refinitiv), 24 Wall Street analysts have weighed in on Palantir Technologies. Five rate it as the equivalent of a strong buy or buy, 15 list it as a hold or market perform, and four have it rated the equivalent of underperform or sell. There's a reason analysts have been overwhelmingly bullish on Palantir -- and it has to do with more than the historical precedent of Wall Street's major stock indexes rising over long periods. To begin with, analysts appreciate Palantir's unique positioning and sustainable moat. The company's two premier artificial intelligence (AI)- and machine learning-driven operating platforms, Gotham and Foundry, have no large-scale competitors. When Palantir lands a client, it tends to hang onto them. To build on this point, Palantir is capable of producing highly predictable operating cash flow quarter after quarter. Its Gotham platform aids federal governments with military mission planning and execution, as well as data collection and analytics. The contracts signed for this segment commonly stretch out four or five years. Meanwhile, Foundry is a subscription-based model geared at businesses that often leads to high retention rates. Palantir also dazzled Wall Street by flipping into the recurring profit column ahead of expectations. While Gotham accounts for the lion's share of its operating income, shifting to recurring profits demonstrates the validity of Palantir's AI-focused, dual-platform model. To round things out, Wall Street analysts have likely anticipated strength in Palantir's operations following Donald Trump's November victory and Republicans winning both houses of Congress. Historically, Republicans haven't been shy about increasing defense spending. President Trump's focus on internal AI innovation and protecting America's security interests plays right into the hands of Gotham. But there's also the real possibility Wall Street's love affair with Palantir is going to end sooner rather than later. Even though Palantir offers a sustainable moat and, thus far, a sales growth rate that's hovered in the 25% to 35% range on an annual basis, there are a few headwinds Wall Street analysts won't be able to overlook. Firstly, there's the realization that all game-changing innovations need ample time to mature. Despite all the hoopla surrounding artificial intelligence and AI stocks like Palantir, there's a strong possibility that investors have, once again, overestimated how quickly this new technology will gain mainstream adoption and/or utility. If an AI bubble were to form and burst, Palantir stock wouldn't be immune. While its multiyear government contracts (via Gotham) and subscriptions (via Foundry) would insulate its revenue from falling off a cliff, investor sentiment during bubble-bursting events would make Palantir stock a target. Secondly, there's only so much growth that can be squeezed out of Gotham with a limited list of potential clients. Though it's great having the U.S. government as a core customer, only the U.S. and its immediate allies can access this sensitive platform. As time passes, this is going to limit Gotham's growth potential. But the No. 1 reason sell ratings on Palantir can more than double in the coming months is the company's inexplicable valuation. To be clear, I absolutely do believe Palantir stock is worthy of a valuation premium. Any company that can deliver double-digit sales growth with a sustainable moat deserves a valuation premium, relative to its peers. But there's a limit as to how far this premium can carry a stock. Prior to the bursting of the dot-com bubble in the late 1990s and early 2000s, leaders like Microsoft, Cisco Systems, and Amazon peaked at price-to-sales (P/S) ratios ranging from 31 to 43. Throughout history, this P/S ratio range of 30 to 40 has commonly served as a top for market-leading businesses on the cutting edge of a next-big-thing innovation. As of the closing bell on July 9, Palantir Technologies' P/S ratio clocked in at 114! That's one hundred and fourteen, with no missing decimal points! No megacap stock in the history of Wall Street has ever been able to maintain a premium P/S multiple of this magnitude. Even if Palantir were able to grow its sales by 30% annually through 2029, its P/S ratio would still be 31 heading into the turn of the decade. This is how far out of whack Palantir's valuation is at the moment. The vast majority of hold ratings on Palantir have attached price targets that are significantly below the $143.13 per share it closed at on July 9. I believe these analysts will struggle to justify any additional increase in their respective price target given Palantir's inexplicable P/S premium. It's simply a matter of time before the valuation-based sell ratings from Wall Street begin to stream in.

Is Palantir Technologies Stock a Buy Now? | The Motley Fool

Palantir Technologies (PLTR -0.53%) is a software platform provider that has been gaining prominence thanks to the improving demand for its artificial intelligence (AI)-focused solutions, and that has led to a phenomenal increase in the company's stock price in the past year. Palantir stock shot up 411% in just one year. Let's see why that has been the case, and check if buying this AI stock after such remarkable gains would be the right thing to do. Palantir's stunning rally can be credited to an improvement in its growth profile in the past year as the demand for its AI software platform is bringing more business into the company's fold. This is evident from the following chart, which shows an upward swing in Palantir's top-line growth in the past couple of years. Looking ahead, Palantir is quite capable of sustaining this upward growth trajectory considering the pace at which it is winning new business and expanding its customer base thanks to AI. Palantir's customer count jumped by 39% year over year in the first quarter of 2025. Apart from this healthy increase in the customer count, Palantir benefited from the size of the deals that it landed. For instance, there was a 60% increase in the number of deals worth $1 million or more during the quarter. What's more, bigger deal sizes also increased significantly, with transactions worth at least $5 million and $10 million nearly doubling year over year. This explains why the total contract value booked by Palantir in Q1 jumped 66% year over year to $1.5 billion, outpacing the 39% increase in its top line to $884 million. It won't be surprising to see Palantir's healthy deal momentum continue on account of the productivity gains that its Artificial Intelligence Platform (AIP) is delivering to customers. Palantir's AIP enables customers to integrate generative AI tools into their operations, powered by real-time data to improve decision-making. Palantir management has pointed out several instances where AIP has led to a sharp improvement in productivity for its customers, and that has led to an expansion in the adoption of this platform. Not surprisingly, Palantir is looking to push the envelope further on the product development front. Management pointed out on the May earnings conference call that AIP has "entered the next phase of product development and adoption focused on enterprise autonomy." The company claims that it is now working on deploying AI agents that could increase productivity by a whopping 50 times. All this clearly indicates that Palantir is pulling the right strings to make the most of the AI software-platforms market that's expected to clock a compound annual growth rate (CAGR) of 51% over the next three years. This fast-growing opportunity, along with Palantir's solid unit economics that are being driven by the expanded use of its AIP by existing customers, should set the company up for impressive bottom-line growth in the long run. As such, it is easy to see why Palantir's bottom-line growth is expected to accelerate. Only a fourth of the 28 analysts covering Palantir recommend buying the stock right now. The majority -- 57% -- rate Palantir at hold, while the rest recommend selling it. Moreover, the median 12-month price target of $110 points toward a 21% drop from current levels. It is easy to see why analysts aren't expecting upside from Palantir despite its impressive growth and sunny prospects -- the stock's valuation has reached astronomical levels. A trailing earnings multiple of 605 is too rich despite the growth that Palantir has been clocking. Even the sales multiple of 111 is very high. Of course, the forward earnings multiple of 250 points toward a significant jump in the company's bottom line, but even that's way too high. So, anyone looking to buy Palantir stock right now needs to be prepared for a lot of volatility since it will have to continue outperforming expectations handsomely to justify its valuation. Any signs of weakness could send the stock packing. However, if there's indeed a pullback in Palantir stock, savvy investors should consider accumulating it as the long-term growth opportunity is good enough to help it become a winner in the long run. So, even though buying Palantir stock is a risky proposition right now, the potential long-term reward is the reason why investors should keep an eye on it and buy the dips.

Is Palantir a Buy? | The Motley Fool

Palantir Technologies (PLTR -0.53%) isn't slowing down. And despite the lofty valuation that makes many investors nervous, this stock won't go away anytime soon, either. The stock is up 420% in the last 12 months, including 77% so far this year. With a market cap of $317 billion, it ranks as the 29th most valuable company in the world. That's incredible, especially when you remember that at the end of 2022, its market cap was less than $15 billion. Palantir's run-up was exciting for investors who bought in several months ago -- gains like this don't happen every day. But is there still time for new investors to take a position, or has this ship already sailed? To answer that question, you have to recognize the difference between valuation and vision -- and decide which is more important to you when you are building your portfolio. Palantir's business revolves around highly sophisticated software platforms that are powered by artificial intelligence (AI). Its Gotham platform is used by governments and defense agencies to manage intelligence, gather information, and identify targets for soldiers in real-time situations. It can operate and send commands to satellites anywhere in the world and gather information from them to send insights back to operators. Gotham is becoming a must-have platform for the U.S. government and others. Revenue from the U.S. government reached $373 million in the first quarter, up from $257 million a year ago. Government revenue from outside the U.S. grew at a much slower clip, going from $98 million to $114 million. The company's Foundry platform is used by Palantir's commercial clients. It integrates everything from multiple departments, as well as the company's mission, market position and growth strategies, to help executives make sense of the big picture and act on it. Foundry customers are working in the fields of AI and machine learning, healthcare research, retail, energy, and more. While Palantir still gets the majority of its revenue from government sources, the commercial side is becoming more profitable. Overall commercial growth was up 33% from a year ago, reaching $397 million. But notably, growth from U.S. commercial clients shot up 71% in the last year, from $150 million to $255 million. And there is its Artificial Intelligence Platform (AIP), which incorporates large language models into Palantir's AI-powered products for both commercial and government clients. The company launched the AIP platform in April 2023, triggering the stock's massive gains over the last two years. The bottom line: The company is growing fast, and it still has room to grow, particularly by expanding its government and commercial customer base outside the U.S. There are plenty of people, including some of my Motley Fool colleagues, who would say that Palantir's valuation makes it too expensive to buy now. And granted, the valuation is ridiculously high. For instance, the price-to-earnings ratio, which measures the company's stock price in relation to its earnings, is 584, while its forward P/E (which measures the stock price in relation to its expected future earnings) is 243. Anything over 50 or 60 makes an investor think twice, so by that comparison, those are awful numbers. And the price-to-sales ratio (P/S), which compares the market capitalization to total revenue, is more than 100. Compare that to another massive market-moving stock, Nvidia, which has a P/S of 26. While these numbers are huge, I think they should also be expected. The work that Palantir is doing is tremendously expensive, and it is just beginning to scale up. Right now, the company's profit margin is only 18%, but it just became profitable in 2023. But as I said in a previous article, it is in a unique position. I don't think the market understands or appreciates the true potential of the work Palantir does and how it will change governments and companies around the world. Management signed 139 deals in the first quarter worth more than $1 million each, and 31 deals worth more than $10 million. Those are numbers that are going to increase -- and I see the stock and market cap continuing to rise. So, the question to ask is: Are you willing to let a valuation number keep you from buying a great company that is before its time? While it's always a mistake to ignore valuation, I think it's equally problematic to make valuation a disqualifying factor. For me, this is a question of valuation versus the extraordinary vision of Palantir's management and the massive opportunity that it has. And for that reason, Palantir is a buy for me.

Where Will Palantir Stock Be in 5 Years? | The Motley Fool

Palantir stock has risen by 85% so far this year, making it the top-performing company in the S&P 500 and Nasdaq-100. When it comes to artificial intelligence (AI) stocks, Palantir Technologies (PLTR -0.33%) might just be the hottest name out there. As of the closing bell on July 8, shares of Palantir have gained 85% on the year. That's better than each member of the "Magnificent Seven" by a considerable margin. As I write this, Palantir is the top-performing stock in the S&P 500 and Nasdaq-100 index so far this year. With a market capitalization of $330 billion, Palantir is currently the sixth-most valuable software company in the world. That's more than Salesforce, ServiceNow, Adobe, and IBM. While chasing a hot opportunity can be tempting, smart investors understand the risks of investing in momentum stocks. Let's take a detailed look at Palantir's valuation to help determine if the company's skyrocketing stock price is justified. Could Palantir stock be headed for even further gains? While the AI revolution does not have a specific starting date, I tend to use Nov. 30, 2022, as my reference point. This is the day that OpenAI released ChatGPT commercially. Since then, Palantir's market value has soared by more than 2,000%. To put that into perspective, that is more than double Nvidia's gains over the same time period. Sometimes, the excitement surrounding new opportunities can reach a fever pitch -- ultimately leading to overstretched valuations and abnormally pricey stocks. This phenomenon is generally referred to as a stock market bubble. The chart illustrates trends in the price-to-sales (P/S) ratio for some of the most popular stocks that gave rise to two of the technology landscape's most memorable bubbles. During the peak of the COVID-19 pandemic, investors were convinced that Zoom Communications, Wayfair, and Peloton would become the default means of communication, home decoration, and fitness, as remote work and social distancing protocols became part of the daily routine. In addition, during the late 1990s, companies such as Cisco, Microsoft, and Amazon were paving the way for widespread internet adoption. Right now, Palantir's P/S multiple of 112 trails only Zoom's peak levels during the height of the pandemic. While I am not saying that AI itself is a bubble, I do think it's fair to say that Palantir's valuation is now well into bubble-like territory. As these trends make clear, eventually the bubble burst, and valuation multiples normalized considerably over the years. Although AI should continue being a transformative catalyst for the data mining company, Palantir's current valuation trends appear unsustainable. I think these dynamics have played a part in rising institutional selling of Palantir stock as of late -- particularly from well-known personalities on Wall Street such as Cathie Wood and Stanley Druckenmiller. Over time, more investors will likely realize that the rise in Palantir stock is misaligned with the company's actual underlying growth. While I can't say for certain what the exact price Palantir will be trading at five years from now, history offers a compelling case that valuation compression is on the horizon. For these reasons, I think that in five years, there is a good chance that Palantir's market capitalization is considerably lower than where it is today.

Where Will Palantir Stock Be in 1 Year? | The Motley Fool

A lot can happen in a year -- especially when you are talking about red-hot growth stocks like Palantir Technologies (PLTR 1.62%), which has already jumped around 412% over the last 12 months. The company is benefiting from surging adoption of artificial intelligence (AI) solutions, especially in law enforcement and military contexts. But with shares near all-time highs, can it maintain its lofty valuation? Let's dig deeper to find out. Founded in 2003, Palantir arguably helped pioneer AI before it was trendy. The company specializes in big data analytics -- offering software-as-a-service (SaaS) platforms that allow clients to sift through vast amounts of information to identify actionable trends, detect fraud, or optimize their supply chains. It serves enterprises and high-profile public sector clients like the U.S. Department of Defense (DoD). While this technology is different from the generative AI behind large language models (LLMs) like OpenAI's ChatGPT, the synergies are substantial. LLMs make Palantir's software much easier to use because operators can perform analysis with simple text prompts instead of complex commands. It also enables these tools to be used in fast-paced real-world scenarios like battlefields or law enforcement operations. Palantir launched its Artificial Intelligence Platform (AIP) in 2023, and that likely has a lot to do with the stock's booming growth since then. The market also seems to have correctly predicted that Trump's election victory would benefit Palantir, even though his campaign initially promised to reduce the military budget and government spending in general. On July 3, Congress passed Trump's "big, beautiful bill," which should be seen as a bullish catalyst for Palantir. According to the BBC, the bill will allocate an additional $150 billion to military expenditures, some of which will fund next-generation capabilities such as AI. Military modernization has already become a massive opportunity for Palantir. In April, the company inked a deal with the North Atlantic Treaty Organization (NATO) to provide its Maven Smart System, designed to help with battlefield awareness and planning. And Palantir is already working with the armed forces of Israel and Ukraine for battlefield targeting. The bill will also increase funding to domestic law enforcement, such as immigration and customs enforcement (ICE), which has historically used Palantir's software for some of its deportation efforts. Palantir's first-quarter earnings were quite good, with revenue jumping 39% year over year to $883.9 million, while adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) increased 45% to $397.3 million. The new legislation could be a catalyst for accelerated growth. Palantir is an exciting company with plenty of opportunities for future growth as generative AI technology becomes more mainstream, and Trump's bill increases the budgets for many of its public sector clients. That said, a great company isn't always a good investment. With a price-to-earnings (P/E) multiple of 574, Palantir's valuation towers above the S&P 500 index average of around 30 and even other AI-related stocks like Nvidia and Microsoft, which boast P/Es of 51 and 38, respectively. The premium suggests most of Palantir's positive catalysts are already priced in. And over the next year and beyond, stock performance will likely be driven by hype instead of a realistic assessment of the company's fundamentals. This doesn't mean it's time to short Palantir stock -- the market can stay irrational longer than you can stay solvent. However, investors who already own shares should consider taking profits.

Should You Worry About Palantir's Valuation? | The Motley Fool

Palantir Technologies (PLTR 3.54%) has had a lot going for it in recent quarters. The artificial intelligence (AI) software company has seen revenue in its commercial and government businesses climb in the double digits and has expertly balanced growth with profitability. Investors have noticed, prompting the stock to soar 1,200% over the past three years. On top of this, with demand for its Artificial Intelligence Platform (AIP) climbing and the overall AI market marching higher toward the trillions of dollars, Palantir's future looks bright. But one element has cast a shadow over this sunny story, and that's the stock's valuation. This too has surged, with the stock today trading for more than 230x forward earnings estimates -- a level that some investors might consider exorbitant. Should you join that camp and worry about Palantir's valuation? Let's find out. So first, we'll talk about why Palantir has become so successful, especially in recent years. The 20-year-old company specializes in software that aggregates a customer's data and helps the customer use that data to make decisions, develop products or strategy, and more -- and the release of AIP two years ago added AI-driven data gathering and analysis, supercharging the software company's abilities. Work with Palantir could be game-changing for a government or commercial customer, which is one of the reasons demand has taken off in recent times. For example, mining giant Rio Tinto says that, thanks to AIP, it's accessing unstructured data and therefore handling problems that it wasn't able to handle before. The general interest in AI is another reason for Palantir's growth: AIP makes it fast and easy for a customer to apply AI to its operations and see the benefits, so, with the AI market expected to reach $2 trillion in a few years, customers may continue to flock to Palantir. The AI boom also specifically has helped Palantir's commercial growth explode higher. Traditionally, Palantir was most known for its contracts with governments -- for everything from military maneuvers to vaccine rollouts -- but in recent times, commercial companies, eager to get in on AI, have flocked to Palantir's AIP. All this means, today and down the road, that both the U.S. government and U.S. commercial businesses represent key growth drivers for Palantir. In the most recent quarter, their revenues rose 45% and 71%, respectively, and Palantir lifted its forecasts for revenue, adjusted income from operations, and adjusted free cash flow guidance for the full year. The company also has been winning when it comes to ensuring both growth and profitability, with a Rule of 40 score of 83% in the quarter. If a software company achieves 40% or higher, it's seen to be doing a good job on this, so clearly Palantir is greatly excelling. Now, let's move along to the one problem that's been keeping some investors from buying Palantir stock, and that's valuation. As mentioned, it's reached an extremely high level and has been at high levels for quite some time. But it's important to remember that other tech giants also have gone through periods, often in their early growth days, of high valuations. We can see this for Amazon, Apple, and Meta Platforms in the chart. And we also can see that shares of each company have gained over time. So, if you refused to buy these companies because of their high valuations, you might have missed out on owning some of the world's most successful technology stocks. And valuations don't offer us a complete picture. They reflect recent earnings or estimates for the coming year -- but they don't consider potential several years down the road. Of course, valuations of these tech giants eventually came down to reasonable levels, and the stocks slipped from time to time, offering investors interesting buying opportunities. It's fantastic to get in on a stock in its early days and stick around for the entire growth story, but the patterns of Amazon, Apple, and Meta show us that, generally, you also can buy a quality company at a later date and still score an investing win if you hold for the long term. Now, let's get back to our question: Should you worry about Palantir's valuation? Not if you're a long-term investor. If you buy the stock even at today's lofty valuation, as long as Palantir continues to deliver solid earnings, you could see your investment grow significantly over time. And if you wait to invest? Valuation may come down at a certain point, and like today's biggest tech companies, Palantir could offer gains to long-term investors -- whether they buy the stock early on or later during this growth story.

Could This Key Development Drive Palantir Stock to New Heights? | The Motley Fool

A sea change is happening within the U.S. military, and it could benefit Palantir. Artificial intelligence (AI) has been around in some form or fashion for over 50 years, but recent developments in the field of generative AI have attracted the attention of Wall Street and Main Street alike. These new AI systems have the ability to refine and distill massive amounts of data, create original content, and streamline processes -- thereby increasing productivity. Potential applications abound, and individuals, businesses, and governments are all looking for ways to cash in on AI. One of the undeniable beneficiaries of this trend is Palantir Technologies (PLTR -0.44%). The company has risen from near obscurity to be one of Wall Street's hottest properties. The stock is up 85% so far this year and boasts gains of 1,760% since the dawn of generative AI in late 2022. While some investors fear Palantir's growth will eventually fade, recent developments help illustrate the long runway ahead and why the stock might still be a buy, despite its astronomical valuation. Investors may recall that in May 2024, Palantir was awarded a $480 million, five-year contract by the U.S. Army for its Maven Smart System. The system integrates data from satellites, drones, and other intelligence sources, using AI and computer vision to scan the battlefield and identify enemy targets. The cutting-edge system also helps prioritize and track the movement of enemy systems, as well as identifying friendly forces in the area. By providing real-time data, Maven gives analysts actionable intelligence. Military leaders were so impressed with the system that in September, they added a $99.8 million addendum to the contract, expanding access to the Maven system across all branches of the U.S. military, including the Army, Air Force, Space Force, Navy, and Marine Corps. The expanded access improves the interaction and operational capabilities between different branches of the service. There's more. By May 2025, Pentagon leaders boosted the contract value by an additional $792 million over four years, bringing the total value of the project to more than $1.3 billion through 2029. A defense official cited the "growing demand" for the system as the catalyst for the increasing contract size. This contract is only one of many, but it helps to illustrate one of Palantir's secret weapons: that of "increasing demand." When users -- military or enterprise -- get their hands on Palantir's systems and actually use them, they begin to understand the myriad ways the system can be deployed. This leads to new users and additional use cases, and ultimately leads to Palantir expanding its relationships with existing customers. Finally, word broke this week that the U.S. Army is "laying the groundwork for a sweeping expansion of its AI capabilities," according to Military.com. The service is developing a military occupational specialty (MOS) focused on AI. The career field, designated 49B, will be focused on AI and machine learning, which shows that the U.S. military is increasingly betting on AI as the future of modern warfare. As a leading provider of AI tools to the U.S. Army, Palantir will likely benefit from this development. Palantir introduced its Artificial Intelligence Platform (AIP) in April 2023, which helps businesses "leverage the power of large language models (LLMs) on their own privately held datasets." The company then adopted a strategy that has proven wildly successful since its introduction. To capitalize on the unprecedented demand for AIP, the company began hosting boot camps, "immersive, hands-on-keyboard sessions" that pair customers with Palantir engineers, which allows them to "go from zero to use case in just one to five days." Because users experience the platform firsthand, they quickly understand the value AIP can bring to their organization and its ability to solve company-specific business challenges. Furthermore, once these AI systems are established within an organization, chances are good that the company will ultimately expand its relationship with Palantir. Don't take my word for it. In the first quarter, Palantir's revenue of $884 million grew 39% year over year and 7% quarter over quarter -- but that only tells part of the story. U.S. commercial revenue, which includes AIP, grew 71% year over year and 19% quarter over quarter, and now accounts for 41% of Palantir's total sales -- not bad for a product that's only been around for about two years. There's more good news: Palantir's so-called "Rule of 40" score, which evaluates the company's revenue growth in relation to its profits, clocks in at 83%, showing a healthy balance of growth and profitability. That's up from just 38% less than two years ago and illustrates the quality of Palantir's earnings. To close out the quarter, Palantir's remaining performance obligation (RPO), or contractually obligated sales that haven't been recognized as revenue, jumped 46% to a record $1.9 billion, while the remaining deal value (RDV) of its U.S. commercial segment soared 127% to $2.32 billion. This gives investors visibility into Palantir's future and helps illustrate that its growth streak still has room to run. Palantir's track record of success and the unprecedented demand for its services come with a hefty price tag. The stock currently sells for a lofty 82 times forward sales and 234 times forward earnings. This is enough to make some investors run for cover, but the most commonly used valuation metrics tend to struggle with high-growth stocks. Because of its high multiples, Palantir stock is prone to wild swings of volatility and, as such, won't be a good fit for every investor. However, as my colleague Adia Cimino points out, valuations don't provide a complete picture, and "If you refused to buy these companies because of their high valuations, you might have missed out on owning some of the world's most successful technology stocks." There's little question that the adoption of AI is just getting started. Given Palantir's industry-leading government and enterprise-level AI solutions and its track record of expanding relationships, I would posit that these recent developments could help drive the stock to new heights. Those concerned about its valuation should consider buying just a small stake to start, or dollar-cost averaging into a position over time.

Palantir Technologies: Could the Stock 10x by 2035? | The Motley Fool

Palantir (PLTR -0.33%) is one of the most popular AI stocks on the market. It has delivered shareholders incredible performance, but everyone wants to know if there's room for more. A lofty yet achievable goal for many investors is to find stocks that have the potential to increase in value 10 times over the next decade. That would be a tall task for Palantir, but is it possible? The answer may surprise you. Palantir develops AI-powered data analytics software that can ingest multiple information streams and generate actionable insights for its users. Additionally, it has tools for clients to make AI agents that can fully or partially automate processes. Palantir also has a great reputation, as its software has been available for a long time. It started as a government-focused company but has expanded into the commercial sector over the past few years. While government revenue remains a vital part of Palantir's business picture, commercial revenue has also risen to become a substantial part of its business. The latest demand for its AI software has been unprecedented, according to management, resulting in stellar results. In Q1, revenue rose by 39%, and management also projected a 38% increase in revenue for Q2. Management has a history of beating internal guidance, so the real projected Q2 growth rate is likely somewhat higher than this figure. However, Palantir's stock price has risen over 700% since the start of 2024, and revenue is only up by 39%. That smells a bit fishy, and investors need to understand what's going on with its current stock price before dreaming about the stock increasing another tenfold. If Palantir's stock increased in value by another 10 times, it would be worth $3.3 trillion, placing it among the largest companies in the world. Although those companies will likely expand in size over the next decade, this remains an incredibly ambitious goal that is unlikely to be achieved. So what's a realistic expectation? First, we need to understand how a stock that has only grown revenue by around 40% year over year can increase in value by 700%. While some of Palantir's growth can be attributed to improved financial performance, most of it has resulted from multiple expansion. Multiple expansion occurs when investors are willing to pay more for a stock than they previously did, even if nothing has changed in its financial picture. This is reflected in the stock's valuation, which has skyrocketed over the past year and a half. The stock now trades for more than 110 times sales, which is an unbelievably high valuation. Few stocks ever reach this valuation point and achieve long-term success, let alone considering how relatively slow Palantir's growth is. Take AI king Nvidia (NASDAQ: NVDA), for example. Throughout its run, it posted multiple quarters where revenue more than tripled year over year. However, it only traded for a maximum valuation of 45 times sales. Palantir is worth more than double that and isn't anywhere close to tripling its revenue year over year. As a result, Palantir's stock has a long way to go to grow into its valuation. If the stock doesn't come crashing down at some point in the next few years, there are several years' worth of growth already baked into the stock. Most software companies trade between 10 and 20 times their sales, with the best (and most highly valued) companies trading for 30 times sales. It will take Palantir's revenue quadrupling from here to reach those levels, which could take some time at today's growth rates. As a result, I don't think Palantir can achieve a 10x return in a decade, and it may struggle to outperform the market from here due to extremely high expectations already baked into the stock price.

As a Former Professional Short-Seller, I Would Never Short Palantir Stock. Here's Why. | The Motley Fool

For several years, I worked as an equity analyst at a long-short hedge fund, with around $600 million in assets under management. While our long book would be larger than our short book, we would be short many more stocks than we would be long in. Typically, we might hold around 15 core long positions, while we could be short more than 70 stocks. The reason for this was quite simple. On the long side, we typically had a more concentrated portfolio in highly researched names that we had high conviction in. However, shorting individual stocks is inherently riskier, so we would keep individual positions small. Since stocks can technically go up indefinitely, you can lose much more than you can make. Meanwhile, if a short goes against you and the stock price goes up, the position size becomes larger, not smaller. This can lead to margin calls, which typically leads to short-sellers being forced to buy back the stock they shorted at a loss. So why short-sell at all? For one, it's a market hedge. But more importantly, most stocks actually do underperform. According to a JP Morgan Asset Management study, between 1980 and 2020, 40% of stocks in the Russell 3000 index -- which consists of the 3,000 largest U.S. traded stocks -- suffered catastrophic losses of 70% or more from which they never recovered. Meanwhile, 42% of the stocks in the index had negative returns during this period. In addition, two-thirds of stocks underperformed the index. However, one lesson I learned when looking for stocks to short is never to short on valuation alone. If there was ever a candidate to short solely on valuation, it would be Palantir Technologies (PLTR -0.33%). After all, the stock trades at an astonishing 82.5 forward price-to-sales (P/S) multiple. Note that this is sales, not earnings. However, valuation is not a reason to short a good company without a near-term downward catalyst. The reason for this can be summed up by an old Wall Street adage that is attributed to the British economist John Maynard Keynes: "The market can stay irrational longer than you can stay solvent." In the context of short-selling, this basically means that a stock can carry high valuation for a very long time, much longer than a short-seller can continue to hold a position. So, while Palantir's valuation may look extreme, the same could have also been said when it traded at 30 times sales or 60 times sales. After all, at the height of software-as-a-service (SaaS) valuations a few years ago, the average SaaS stock only got up to around a 20 times P/S multiple with over 30% revenue growth. Meanwhile, the company has been executing strongly. Its revenue growth has accelerated each of the past seven quarters and grew 39% in the first quarter. While high valuations can make a stock more vulnerable to any missteps or disappointments around quarterly earnings, Palantir right now has been firing on all cylinders. Whether to buy Palantir stock is a trickier question to answer, but there is reason to believe that the company could eventually grow to become one of the largest in the world. It started out as a data-gathering and analytics company primarily for the U.S. government, where its technology could be used to discover complex patterns, enabling the government to help track terrorists. But with the advent of artificial intelligence (AI), it has become a major player in the commercial space. Instead of looking to build a better AI model, Palantir set out to make AI more actionable through its data gathering and analytical capabilities. Its Artificial Intelligence Platform (AIP) gathers data from a variety of different sources and then connects the data to its real-world counterparts. This essentially turns AIP into an operating system where customers use AI models to find solutions to real-world problems. Today, AIP is being used across an array of industries for remarkably diverse tasks. These include monitoring for sepsis at hospitals, helping a homebuilder streamline its land-development bidding process, and improving the logistics and supply chain of a cereal maker. The U.S. government uses its technology for mission-critical tasks, including on the battlefield. And even NATO recently signed a big deal with the company. The breadth of uses for AIP and Palantir's technology is extraordinary and is the reason the company has the potential to grow into one of the biggest in the world. As such, while I would prefer to buy the stock on a dip given its valuation, I think it has a very good opportunity to be a huge long-term winner.