Here's Why I'm Avoiding Palantir Technologies Stock

2 days ago 2

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Keithen Drury, The Motley Fool

Tue, Apr 1, 2025, 3:30 AM 4 min read

Palantir Technologies (NASDAQ: PLTR) has been 1 of the top-performing artificial quality (AI) stocks successful the market. It's up astir 400% since the commencement of 2024 and is really up astir 10% for the twelvemonth contempt tumbling astir 30% from its all-time precocious established successful mid-February. Despite these returns, I privation nary portion successful Palantir banal close now.

This whitethorn travel arsenic a surprise, but I deliberation the marketplace has gotten up of itself with Palantir, and a further downturn could beryllium close astir the corner.

Palantir has been astir for a agelong time, and its artificial quality (AI)-powered information analytics bundle suite has go rather popular. Originally, its products catered to the government, but its concern expanded to see the commercialized sector. This dual maturation way worked retired good for Palantir, arsenic its gross roseate steadily since 2024.

PLTR Operating Revenue (Quarterly YoY Growth) Chart

The biggest takeaway is that Palantir's gross maturation is inactive accelerating, which investors emotion to see. In the archetypal quarter, absorption expects to turn gross by 36%, but that's astir apt an underestimation. Palantir's absorption has a past of guiding a spot little to present a gross bushed each quarter. This is acold amended than the over-guiding and underperforming alternative, truthful I won't deduct thing from absorption for doing that. However, it's thing investors request to support successful caput if Palantir's maturation comes successful astatine 36% oregon lower; the marketplace could beryllium disappointed, arsenic outperformance is becoming the anticipation for Palantir.

However, if you look astatine the banal valuation, outperformance is indispensable to warrant the banal price.

With Palantir's astir caller gross maturation complaint coming successful astatine astir 36%, the banal rising astir 400% implicit the past twelvemonth should propulsion reddish flags up for investors. The concern maturation complaint is obscurity adjacent the banal maturation rate, which could beryllium a hint that the banal is importantly overvalued.

When you analyse Palantir's price-to-sales (P/S) ratio, this could beryllium the case.

In aboriginal 2024, Palantir's banal traded for a debased of 16.5 times sales, which is toward the higher extremity of wherever bundle companies usually commercialized (10 to 20 times sales). At 77 times sales, Palantir needs to beryllium putting up unbelievable maturation rates, which it isn't doing. I'm not going to harp connected the 36% maturation that the institution is putting up close now; that's a precise beardown and awesome rate. However, for the banal to commercialized for 77 times income portion increasing astatine that level isn't sustainable.