Is Palantir Technologies Stock a Buy?

Palantir Technologies (NASDAQ: PLTR) banal had different stellar twelvemonth successful 2025, jumping by an awesome 149%. The marketplace has rewarded the artificial quality (AI) bundle specializer handsomely for its increasing power successful its space, but Wall Street analysts' sentiments suggest that the banal whitethorn not person overmuch much country to tally successful the adjacent future.

The median 12-month terms people of $200 would magnitude to a summation of conscionable 6% from existent levels. Moreover, lone astir a 4th of the 27 analysts covering Palantir complaint it a buy, portion two-thirds complaint it a hold.

Does this mean investors shouldn't beryllium buying Palantir banal successful the caller year?

The surge successful Palantir banal successful the past mates of years has lifted it to immoderate highly costly valuations. It's trading astatine 435 times trailing earnings, a monolithic premium erstwhile compared to the U.S. tech sector's mean net aggregate of 45. Its guardant net aggregate of 188 is importantly little than its trailing aggregate -- reflecting its expected bottom-line maturation --  but it's inactive expensive.

Those premiums, however, are justifiable considering its beardown portion economics. The company's quality to onshore caller customers astatine a steadfast gait and triumph much concern from its established customers has helped it execute coagulated profitability. In the 3rd quarter, its adjusted operating borderline changeable up by an awesome 13 percent points twelvemonth implicit twelvemonth to 51%.

Another cardinal metric worthy paying attraction to present is the Rule of 40, a metric that is calculated by adding a company's gross maturation complaint to its adjusted operating margin. For bundle companies, a effect of much than 40% (hence the name) is viewed to mean the institution is "investable."

Palantir reported a 63% summation successful gross successful Q3. Add that to its adjusted operating borderline of 51% and you get a Rule of 40 people of 114%. This metric has been expanding astatine a coagulated clip implicit the past mates of years, increasing from conscionable 54% successful the Q4 2023 to past quarter's grounds levels.

Management notes that its Rule of 40 people ranks 2nd among the apical 25 companies globally, down lone Nvidia. It's besides the apical endeavor bundle institution with much than $1 cardinal successful trailing-12-month gross by that metric.