I make no attempt to hide my appreciation for Palantir Technologies (NASDAQ: PLTR) stock. The data analytics company has been one of the best stocks in the market since it unveiled its Artificial Intelligence Platform (AIP), which incorporates large language models enabling users to interact with the company’s powerful software and gain real-time insights across everything from supply chain to military intelligence.
The results have been incredible. Look at Palantir’s growth story since AIP came online in April 2023.
Will AI create the world’s first trillionaire? Our team just released a report on the one little-known company, called an “Indispensable Monopoly” providing the critical technology Nvidia and Intel both need. Continue »
|
Year |
End-of-Year Stock Price |
Annual Gain (or Loss) |
|---|---|---|
|
2020 |
$23.55 |
147.9% |
|
2021 |
$18.21 |
(22.7%) |
|
2022 |
$6.42 |
(64.7%) |
|
2023 |
$17.17 |
167.4% |
|
2024 |
$75.63 |
340.5% |
|
2025 |
$177.75 |
135% |
|
2026 (through March 17, 2026) |
$154.37 |
(13.1%) |
Data source: YCharts.
Even though Palantir (and many other tech stocks) are taking a bit of a breather so far this year, I’m convinced that the company’s growth story is still in full swing. In fact, I’m such a Palantir stock bull that I’m able to overlook its one major flaw — the valuation.
Palantir currently trades at a price-to-earnings ratio of 243 — a mind-numbing figure. Consider that Nvidia, which is perhaps the most successful company on Wall Street, has a P/E of just 37. That means that investors are paying a lot more for Palantir’s earnings than they are for Nvidia’s, even though Nvidia’s graphics processing units helped it become the most valuable publicly traded company in the world. So, while investors are betting that Palantir will continue to increase its earnings in the future, they’re running a risk that the company is already badly overvalued.
Even Palantir’s forward P/E ratio of 116 is eye-watering compared to Nvidia, which has a forward P/E of just 22.
But notably, Palantir’s extreme valuation is beginning to moderate. Just a year ago, the P/E was north of 600.
What’s happening with Palantir isn’t unprecedented. Remember that Amazon had a P/E of more than 1,000 for a short period in 2013. Things like that happen when the greater market is slow to appreciate the transformative nature of a company that’s truly doing revolutionary things. Amazon was like that when it was “just” an e-commerce company, but has since grown into a global juggernaut that is also the world’s largest cloud computing company.