Palantir's Stock Surge: Analyzing the AI-Driven Growth and Future Prospects

The Future Looks Bright For Palantir (NYSE:PLTR)

Analysts project Q2 2024 EPS of $0.0806, a 61.2% YoY growth. Palantir's consistent overperformance suggests a strong post-earnings rally is likely. Since our last coverage, Palantir Technologies (NYSE:PLTR) stock has validated our conservative price target and is also on the cusp of getting it before schedule. The impressive 34% rise reflects growing confidence in the strategic initiatives that Palantir is prosecuting, including the successful integration of the Stock Appreciation Rights (SARs) and their impact on reducing stock-based compensation (SBC) dilution. These strategic moves aligned employee incentives with shareholder value, enhancing Palantir's long-term growth potential. Views are optimistic and based on Palantir's financial health, substantial cash reserves, strong revenue growth, and operational efficiency. The Q1 2024 results impressively increased operating income to $80.9 million, up from $4.1 million in Q1 2023. Due to sustained bullish momentum and fundamental strength, this trajectory suggests that hitting our higher price target of $35 by the end of 2024 is feasible. We maintain our strong buy rating ahead of Q2's upcoming earnings on Palantir based on sound fundamentals, the capitalization of industry 5.0, the revised SARs scheme that reduces SBC dilution, aligning compensation with shareholder interests, and the fast-growing applications of AI technologies across many sectors. Industry 5.0, otherwise called the Fifth Industrial Revolution, is a drastic turn of events from the purely economic objectives of Industry 4.0 to a much more human-centered phase. This phase concatenates new technologies such as AI, IoT, and robotics with human ingenuity and creativity. Further, this phase tends to focus on workers' well-being, targeting creating sustainable, resilient, and efficient industrial processes. Hence, it tends to collaborate between humans and machines to improve processes that encrypt solutions to societal and environmental challenges, moving beyond productivity and efficiency to social value and well-being. AIP by Palantir is the disruptive technology for Industry 5.0 since it empowers seamless integration and contextualization between structured and unstructured data. High-fidelity dynamic digital twins of manufacturing operations offer real-time tracking and process management capabilities. AIP forms an intelligent representation of operations by fusing different sources of information and schematics. This makes all relevant insights into metrics such as machine throughput, safety incidents, and energy efficiency available. In this way, it provides the smart factory with the integration for informed decision-making and proactive management. The best feature of Palantir AIP is its ability to provide real-time decision-making and predictive analytics. The platform enables real-time actions by making critical data accessible through a mobile-responsive app, allowing operators to take stalled measures that are informed. Herein, predictive models in the platform simulate what will happen if certain potential actions are taken; hence, users can know how to act intelligently and forestall problems before they develop. Taking a proactive approach in manufacturing to ensure efficiency and the least downtime. The Industry 5.0 market is expected to grow from $65.8 billion in 2024 to $255.7 billion by 2029 at a CAGR of 31.2%. AIP captures market share in this space. Palantir's AIP integrates disparate data sources into one common platform, creating a digital twin of the production process. It is crucial because perception, predictive maintenance, and optimization of operations all embody real-time and effective insight. For instance, using Palantir Foundry, the gigantic datasets are transformed to yield meaningful insight and are turned into strategic actions that can be applied across enterprises. Commercials with customers' revenue streams make 45% of the total revenues in 2023 and are expected to scale with a list of accelerating Industry 5.0 technologies across industries. On the industry-specific front, Palantir offers predictive maintenance, production scheduling, and quality control solutions designed for the automotive, healthcare, and energy sectors. That could become hard revenue growth and deeper client relationships, further enhancing Palantir's market share in the Industry 5.0 space. Since its DPO, Palantir's SBC has been a significant concern for investors due to dilution risks. However, recent strategic adjustments, mainly introducing approximately 44 million Stock Appreciation Rights (SARs), indicate that Palantir is effectively addressing these issues. SARs incentivize employees with cash payments based on stock price appreciation without issuing new shares, thereby mitigating dilution. Conditions include a $50 target price, 5 years of service, and a $20 max appreciation per SAR. This shift is evident in the Q1 2024 report, where Palantir reported an SBC expense of $125.7 million, a more controlled figure than previous periods. Under the scheme, employees would be rewarded when Palantir's stock price exceeded the target price of $50 for a 5-year service period. Maximum appreciation for each SAR was capped at $20, and Palantir granted 44 million SARs. For example, if in 2029 the stock price is $60, then each SAR would be worth $10, amounting to a total payout of $440 million. If the stock price reaches $70 by 2030, then each SAR would be worth a maximum of $20 for a total payout of $880 million. These payouts are manageable, given Palantir's growing net cash reserve of approximately $4 billion. The introduction of SARs changes a big part of Palantir's SBC strategy, which is at the forefront of solid alignment with stock performance and improved talent retention. The SARs will ensure that employees are rewarded only when the company's stock does well; therefore, a direct compensation link will connect long-term shareholder value. This development suggests that Palantir's SBC is more sustainable and aligned with shareholders' interests now than before. This is important because it ensures a clear link between the business's goals and the employees', connecting employees' incentives to the company's success, which in turn creates a performance culture. Palantir's strong cash position and emphasis on SARs better position the company to withstand future SBC-related payouts without affecting shareholder value. Thus, Palantir has delivered robust revenue growth and profitability, underlying its ability to hit ambitious targets. This Q1 2024 reached an operating income of $80.9 million, up from $4.1 million in Q1 2023, highlighting operational efficiency improvements. Assuming the continuation of this trajectory, such growth supports the feasibility of reaching the required stock price and revenue growth to fully realize SAR benefits for employees and shareholders. Several factors may be necessary in influencing PLTR's performance in light of the Q2 2024 earnings report. The historical trend has been that, after solid beats on both revenue and EPS, the stock usually experiences strong post-earnings rallies. For Q2 2024, analysts' consensus stands at $0.0806 in EPS with a projection of 61.2% year-over-year EPS growth. Palantir has consistently beaten its guidance; EPS figures are often higher than analyst expectations. Palantir's trend positions it for a strong rally if it continues trouncing such market projections. AI has been a key driver of Palantir's recent success. The momentum continues for the company's AI Platform, AIP, launched in early 2023, underscored by AIPCon4, which happened in June 2024, where more than 70 customers showed their AI use cases developed through the bootcamps of Palantir. This growing adoption thus puts Palantir at the core of this new AI revolution and gives momentum to its future performance. The company has held over 1,300 AIP bootcamps since 2023, nearly 500 since March 2024 alone, indicative of solid momentum and broad acceptance of its AI solutions. Government contracts remain one of Palantir's main revenue streams. The US Army extended a five-year deal with Palantir for the Maven Smart System, worth roughly $90 million annually. The Department of Defense Chief Digital and Artificial Intelligence Office has further awarded Palantir the eleventh contract, valued at approximately $480 million over five years. All these recent contract wins, most notably the US Army project TITAN worth $178 million, continue to cement a position in this sector for Palantir. These chunky contracts should provide stable revenue and support Palantir's stock, even amid concerns over international market performance and commercial growth in the US. With the major AI developments, strong government contracts in the pipeline, and the history of post-earnings rallies, Palantir is well-positioned for a positive Q2 2024 earnings call. Eyes will be on whether Palantir can finally maintain its upward momentum to quell lingering concerns over commercial growth and international performance. Palantir won a two-year, $19 million contract with the Advanced Research Projects Agency for Health (ARPA-H), which it hopes to improve upon for accelerated health outcomes. ARPA-H seeks to assert an enterprise-wide data strategy and infrastructure to drive seamless business operations and sustained improvement by integrating Palantir AIP and Foundry software. The joint activity embodies how Palantir dedicates top-notch technology to supporting important public health activities. The mandate for ARPA-H is to drive high-impact biomedical and health research that traditional ways cannot easily attain. Backed by Palantir's software, the data-centric approach followed by the agency will be able to efficiently design programs and rapidly develop new insights using the power of artificial intelligence. The strategy will help ARPA-H track, learn from outcomes, and stay accountable to the government and the public to quicken innovation in health solutions. With a deep background in providing data infrastructure to public health mission projects, including work with the National COVID Cohort Collaborative, HHS, CDC, and FDA, Palantir is well-placed to be an ideal partner for ARPA-H. This will ensure that programs within ARPA-H are executed with requisite workflows critical to strategy, financial management, and performance tracking under one uniform data strategy. This partnership shows Palantir's ability to bring cutting-edge technology that transforms healthcare operations and improves lives. With strategic initiatives and a leading market presence, Palantir will be in a powerful position for future growth. The company's astute use of SARs aligns employee incentives with shareholder value. Moreover, Palantir is well-positioned to ride the wave of Industry 5.0's anticipated $255.7 billion market by 2029. Finally, the broad Adoption of AI further consolidates the company's market share, supporting our price target of $35 by the end of 2024.

Palantir's Stock Is Soaring. Is Now the Time to Buy? | The Motley Fool

Palantir (PLTR 1.23%) has had a phenomenal 2024, rising 66% so far this year. Performance like that only comes when a business excels, and that's exactly what Palantir is doing. However, stocks sometimes run up in anticipation of these strong business gains, and many investors might be worried they've already missed the boat. So, is this just the beginning for Palantir? Or has it already peaked? With such a strong year-to-date performance, it's likely no surprise that Palantir is involved with artificial intelligence (AI). AI has been all the investing rage over the past year and a half, but for a good reason. With the rise of generative AI models, the technology is becoming more viable for the everyday person. This is a key development, as more people are starting to feel comfortable with AI integration. AI integration is Palantir's business, and it has been doing that for a long time. It started as a company that sold AI software to governments to help them process mounds of information quickly and give them actionable insights. Eventually, Palantir realized this software also had a strong commercial use case, so it expanded from its original market. However, that software was a stand-alone product that could be used to make decisions on the side. Palantir's latest product, Artificial Intelligence Platform (AIP), is a much more integrated platform. AIP allows large language model (LLM) integration, helping the user to utilize generative AI effectively. Developers can then use these building blocks to create custom applications, automate workflows, or build other AI-powered applications for their business. AIP is a massive step forward for AI and represents the next step in AI integration. Management describes the demand for AIP as "unprecedented" even though a fraction of its customer base is adopting it. Right now, it's primarily the U.S. commercial customer base that is rapidly deploying this tool. However, that cohort only made up about a quarter of overall revenue companywide. Palantir has a strong global presence, and its commercial revenue split is nearly perfect between domestic and international sales. However, its government revenue stream still makes up the majority of Palantir's sales, with it consisting of 53% of total revenue. Management is confident that AIP will expand internationally and in government, which is a massive growth catalyst that has yet to be realized. But does that justify the stock's price tag? Palantir's stock has risen much faster than its business has grown, so it has become quite expensive on a valuation basis. It's complicated to choose which valuation metric to use for Palantir. The company is fully profitable but hasn't achieved normal software company margins yet, but it is improving each quarter. This makes the price-to-earnings (P/E) ratio a bit misleading. Because of its profitability, the price-to-sales (P/S) ratio isn't valid either since it's normally used for companies without profits. So what should investors do? I think the best way to value Palantir is to project future growth and margin expansion and then apply a typical software company multiple to the stock. Wall Street analysts project 21% growth in 2024 and 2025, which is a good baseline growth figure. If Palantir can improve its profit margin to 25%, it would enter territory that mature software companies like Adobe achieve. Since Adobe switched to the subscription model, it has traded around 50 times earnings, which is a hefty premium to the market. Looking out three years, if Palantir maintained its growth, improved its margins, and had that premium, it would be worth $51.7 billion. That may seem like a big company, but the problem is that Palantir is worth $63.6 billion already. So, if Palantir succeeds over the next three years, its stock may go backward. That shows the high expectations built into Palatnir's stock right now. However, if these assumptions are wrong, Palantir's stock may continue rising. Regardless, I think it's a bit of an extreme valuation, so I will pass on the stock for now.

Palantir Is Expensive For A Reason (NYSE:PLTR)

This idea was discussed in more depth with members of my private investing community, The Financial Prophet. Learn More " The last time I wrote about Palantir (NYSE:PLTR), the stock had dropped after delivering solid earnings and firm guidance. I discussed buying the dip, and the stock has increased by about 30% since. Still, I often hear that Palantir is expensive. The stock recently received a downgrade due to its "egregiously rich" valuation. The analyst used strong language while assigning Palantir a sell rating and a $20 price target. More recently, Wedbush upgraded Palantir, citing better-than-anticipated AI monetization, a price target of $35, and a "bullish case" $50 price target for 2025. Palantir remains a top battleground stock. However, it is uniquely positioned, as its artificial intelligence platform, "AIP," is highly likely (in my view) to continue gaining global market share as we advance. Palantir remains on track to become a leader in the AI software industry and has not even had its "Nvidia moment" yet. While Palantir's stock is relatively expensive, with good reason, and Palantir is set to deliver its earnings on August 5. Palantir could provide better than anticipated results, especially in the private segment, and the stock could break out to new highs. Moreover, Palantir could announce significantly better than expected guidance, enabling its stock to move to $35. Furthermore, Palantir could continue outperforming downbeat consensus estimates in future quarters, allowing its stock to reach $50 or higher in 2025. The AI Software Market Should Be Massive We are still in the early innings of AI, especially in the AI software space. The Software segment is unique because a significant portion of this space may be dedicated to improving corporate efficiency. While recent revenues in this sector may be around $200B (annual), we could see sales skyrocketing to over $1T in the next several years as companies aim to leverage AI to improve various facets of operations. What Is AIP? At its core, AIP is designed to optimize organizational efficiency, increase productivity, and, ultimately, improve profitability. Every organization, government and private, foreign and domestic, can benefit from this. AIP collects and processes massive amounts of information, delivering operational-critical solutions to its customers. Let's go over several examples. Imagine you are an army commander and see an opposing army amassing nearby. AIP can model what types of scenarios we can expect from the enemy. Also, AIP can model what approaches may work best in which scenario, and it can modify elements in real-time as new elements materialize, providing your army with a significant edge. In a corporate environment, suppose an earthquake or another natural disaster has impacted or may impact your operations. AIP can model the damage a company may face and how to improve the situation in any scenario. For instance, if a warehouse could be impacted, AIP can provide critical information relevant to cost-cutting and how best to divert operations to another space. These are several basic examples of what AIP can do and why more organizations use it. More firms will likely become adopters and long-term users of Palantir's software products and services, as the net benefits often outweigh the costs. Furthermore, Palantir is unique as (to my knowledge) no other company offers the "complete package," the ability to bring immense quantities of information together from various facets of an organization, efficiently process it, and provide comprehensive solutions applicable to individual situations all in one place. Therefore, Palantir is in a highly advantageous blue ocean market position, offering high-quality, market-leading solutions and services arguably applicable to any organization globally. Again, Palantir has no apparent competition that can deliver the entire package nearly as seamlessly and effectively. Palantir Is Also A "Trump Trade" Palantir did fine during the Biden administration, but If you want to discuss a "Trump Trade," this is it. Peter Thiel, Palantir's co-founder, has been a Trump supporter in the past. Moreover, Thiel donated about $30M to Republican Senate efforts in 2022, and $15M went toward JD Vance's 2022 senate campaign. JD Vance, Trump's VP pick, could be Peter Thiel's "guy" in the White House if Trump/Vance win in November. Thiel could be a primary reason Vance entered politics, and he even employed him before supporting his Senate campaign. JD Vance owes a lot to Peter Thiel. Having the President or Vice President's ear is a constructive factor, especially when your company is a significant government contractor still deriving most of its revenues from the U.S. government. Therefore, if the Trump/Vance ticket wins the White House in November, we could see an uptick in Palantir's government segment growth, which has lacked lately. Palantir's "Nvidia Moment" Approaches Palantir's stock has done well since bottoming around $6 in late 2022/early 2023. This dynamic represents a gain of nearly 400%. Palantir is also up by about 100% off its 52-week low recorded in the selloff last Fall. While these are spectacular gains, we have not yet seen that "Nvidia moment" from Palantir. The Nvidia moment could occur if Palantir preannounces or announces much better-than-anticipated sales and earnings figures and substantially better-than-expected guidance due to increased demand for its services and more effective monetization of its AI platform. This phenomenon would suggest that Palantir's consensus and even higher-end estimates are likely too low, leading to considerable upward sales and EPS revisions. Revenue Estimates Could Be Too Low Palantir's consensus sales estimates are only about 18-20% growth in future years. Of course, the stock seems expensive if we use these lowballed projections. However, Palantir's push into the commercial segment with its market-leading AIP and the potential for reinvigorated growth in its government segment business could enable sales to increase much quicker than projected. If we consider "higher-end" sales estimates, Palantir's revenue growth could be around 25-30% in the coming years. However, in a bullish case scenario, Palantir could eclipse the current higher-end projections, potentially delivering 30-35% sales growth as we advance. EPS Could Increase More Than Expected Palantir's business is highly profitable. It is a unique software and services company with little, if any, comprehensive competition. Therefore, it will likely remain highly profitable and become more profitable with scale. Palantir's Margins Likely to Continue Improving Palantir's gross margin is remarkably high, over 80%. Moreover, we've recently seen Palantir's net and operating margins become positive. Thus, Palantir is not some "high in the sky" valuation company that may or may not become profitable in future years. Instead, we see concrete GAAP profitable results from Palantir, and profitability will likely only increase. Furthermore, we could see an acceleration in net profitability metrics as net income could increase more than anticipated as Palantir's operations increase in scale. EPS Could Increase More Than Expected While it's impressive that Palantir has become this profitable this quickly, EPS could increase more than the current lowballed estimates suggest. Palantir could surprise higher on August 5, delivering higher EPS than expected, but whether this quarter becomes its Nvidia moment remains to be seen. Regardless, I am more focused on the intermediate and longer-term image regarding Palantir and its stellar earnings potential. The consensus 2025 EPS estimate is only about $0.39, and the "higher-end" estimate is only about $0.45. Yet, Palantir could achieve 50 cents or higher in a bullish case outcome. Moreover, we could see substantial EPS growth in future years. Palantir may earn around $1 in EPS in 2027 or 2028 instead of the projected 2030. How is this possible, you ask? First, Palantir has demonstrated the ability to become profitable relatively early and is still in a high growth period of its developmental cycle. Second, we see Palantir's profitability metrics improving consistently. Third, high-quality, monopolistic-style software companies with around 60-80% gross margins produce 25-40% net income margins. So, why wouldn't Palantir? Palantir has increased its gross margin to over 80% in recent quarters. Its net income margin has skyrocketed from being continuously negative post-IPO to almost 17% last quarter. 2027 consensus Sales estimates are only for $5B, but that may be the current base case. Applying a 27% net income margin to $5B in sales suggests Palantir could deliver $1.35B in net income in several years (2027). Palantir has around 2.21B shares outstanding, and the share count appears to have leveled off, suggesting that the "major" SBC dilution is behind us. A net income of $1.35B with 2.4B shares implies Palantir may earn around $0.57 in EPS in this dynamic. However, let's explore a slightly bullish case scenario in which Palantir achieves around $6B in revenues in 2027 and reaches around $7.5B in 2028. Additionally, Palantir's profitability should continue improving with scale, and it may achieve about a 30% net income margin in 2027 and 32% in 2028, with a slightly higher number of shares (roughly 2.4B). Under this somewhat bullish but realistic scenario, Palantir could earn about $1.8B in net income in 2027 and approximately $2.4B in 2028, translating to roughly $0.75 and $1 in EPS. Where Palantir's stock could be in the future: Year 2024 2025 2026 2027 2028 2029 2030 Revenue Bs $2.85 $3.6 $4.7 $6 $7.5 $8.9 $10.8 Revenue growth 28% 26% 28% 28% 25% 24% 23% EPS $0.38 $0.48 $0.61 $0.75 $1 $1.31 $1.64 EPS growth 52% 26% 27% 23% 33% 31% 25% Forward P/E 73 75 72 70 65 60 55 Stock price $35 $46 $54 $70 $86 $99 $120 Click to enlarge Source: The Financial Prophet Due to Palantir's exceptionally high profitability, extremely long growth runway, and monopolistic-style market position, it could achieve remarkable sales and earnings growth for many years, enabling its stock to garner a relatively high forward P/E multiple of 50-75 in future years. Also, Palantir's sales growth could eclipse 30% in a more bullish case scenario, and its net profit margin could move above the 25-35% range. Therefore, Palantir's financials may improve more than my projections suggest, enabling its stock to appreciate more considerably in a more bullish case outcome. Risks to Palantir Palantir faces risks despite my bullish assessment. Slower-than-anticipated growth due to a sluggish economy, high rates, and other factors could keep Palantir from achieving its optimal potential. The company also faces the risk of worse-than-expected demand for its AIP and products and services from the commercial segment and government sectors. Palantir also faces the risk of increased competition surrounding its lucrative AI segment. Moreover, Palantir's profitability could be lower than projected, and the stock price may not appreciate as robustly as my model suggests. Investors should examine these and other risks before investing in Palantir. Are You Getting The Returns You Want? Invest alongside the Financial Prophet's All-Weather Portfolio (2023 47% return) and achieve optimal results in any market.The Daily Prophet Report provides crucial information before the opening bell rings each morning.Implement my Covered Call Dividend Plan and earn 50% on some of your investments. All-Weather Portfolio vs. The S&P 500 Join The Financial Prophet And Become A Better Investor! Don't Hesitate! Take advantage of the 2-week free trial and receive this limited-time 20% discount with your subscription. Sign up now and start beating the market for less than $1 a day! Victor Dergunov is an independent investor and author with 20 years experience. He preaches diversification and shares investment ideas across all market sectors. Victor aims to help readers build portfolios that perform well in all economic conditions. He runs the investing group The Financial Prophet where he covers all market sectors and shares strategies for well-diversified investing. Features include: the All-Weather portfolio, trade alerts, technical analysis, daily reports with his latest updates, covered call strategies, and direct access in chat. Learn more. Analyst's Disclosure: I/we have a beneficial long position in the shares of PLTR either through stock ownership, options, or other derivatives. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article. I am long a diversified portfolio with hedges. Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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

How could artificial intelligence technology transform military contracting and law enforcement? With shares up 58% over the last 12 months, Palantir Technologies (PLTR 1.23%) has been a solid performer in the competitive artificial intelligence (AI) landscape. While the company isn't involved in the highly lucrative hardware side of the opportunity, its software focus could help transform military contracting and law enforcement. Let's explore how the company's near-term decisions could impact its long-term potential. According to Bloomberg Intelligence, the generative AI industry could grow at a compound annual growth rate (CAGR) of 42% to $1.3 trillion by 2032. Initially, most of this expansion will benefit hardware companies like Nvidia and Advanced Micro Devices (AMD), which make the computer chips needed to run and train these advanced algorithms. However, over time, the market is expected to shift toward software companies like Palantir that use AI to solve real-world problems. Law enforcement and the defense industry might be willing to pay big bucks for solutions that keep them one step ahead of their adversaries. For this niche market, Palantir's key asset might be trust. The company has a long track record of working with high-level government clients for demanding and highly sensitive missions. Its software helped the Department of Defense track down Osama Bin Laden over a decade ago. And now, it's working with the governments of Ukraine and Israel for combat-related missions in their respective wars. Palantir's clients often place it under political and media scrutiny. A 2020 opinion piece in The Guardian called its data-analytics tools "unethical," calling the company the "big tobacco" of the tech world for its role in helping the Trump administration with deportations. But technology is just a tool that's only as good as the people using it. And as a government contractor, Palantir probably won't face regulatory scrutiny related to its software. That pressure would more likely be directed at the government itself. And there's little evidence that bad press is hurting Palantir's ability to attract private-sector clients. In the first quarter, Palantir's commercial sales jumped 27% year over year to $299 million, outpacing government sales (up 16% to $335 million). Instead of scaring away private-sector clients, Palantir's high-profile government work may be convincing them of the robustness and security of its software solutions. The company's willingness to stand up to media pressure could also boost its competitive moat against competition. In May, Palantir won a $480 million contract for the U.S Army's Maven Smart System, an AI-based targeting system previously abandoned by Alphabet's Google in 2018 amid high public and internal backlash. Palantir has proven much more resilient against this sort of pressure. Over the long term, Palantir looks like a big winner as AI technology becomes increasingly important in law enforcement and the defense industry. But in the near term, investors should pay close attention to the stock's valuation, which is much too high for comfort.