Palantir: A Most Curious Investment

by

One observes, with a degree of detached amusement, that Palantir Technologies (PLTR 3.45%) has enjoyed a rather giddy ascent since the artificial intelligence craze took hold in late 2022 – a gain of 1,880%, if you please. Naturally, gravity – and a touch of market sensibility – has intervened, resulting in a recent 17% correction. A trifle dramatic, perhaps, but hardly unexpected. The question, as always, is whether this is a mere pause for breath, or the prelude to something… less agreeable.

The bulls, bless their optimistic hearts, insist that Palantir offers indispensable analytics and artificial intelligence tools, assisting both commercial enterprises and governmental bodies in making… decisions. One gathers it’s frightfully clever stuff. The bears, however, maintain that the share price is based more on hype than on, shall we say, robust fundamentals. A perfectly reasonable observation, though lacking a certain… flair. It’s a tiresome dichotomy, really.

Currently trading at $170 per share, analysts offer a predictably wide range of opinions. From a rather gloomy $50 to an almost offensively optimistic $255. The median target of $200 suggests a modest 17% advance. One suspects the analysts are simply attempting to justify their existence. A perfectly understandable impulse.

The Bullish Perspective: A Most Sophisticated Operation

The argument for Palantir, in essence, is that it’s rather good at helping people – both in the public and private sectors – build and deploy artificial intelligence solutions. Forrester Research, with a straight face, has declared them a leader in AI decisioning platforms. The International Data Corp. also seems impressed with their procurement and supply chain management. One wonders if they’ve actually seen the software, or merely read the marketing brochures.

Janice Quek at CFRA Research was, apparently, “impressed” with the third-quarter results. Revenue increased 62%, a ninth consecutive acceleration. She also mentions a “Rule of 40 score of 114%.” One trusts she has a calculator handy. Dan Ives at Wedbush Securities, ever the enthusiast, has declared Palantir a top pick for 2026, calling its software the “gold standard.” One suspects Mr. Ives enjoys a good sales pitch.

Mariana Perez Mora at Bank of America observes that Palantir is “unmatched” in its ability to deliver solutions and provide human-machine teams with informed decisions. Ryan Taylor, Palantir’s executive, claims their unique capability lies in moving from prototype to production. A rather boastful claim, but one can’t help but admire the audacity.

Sanjit Singh at Morgan Stanley praises their financial results and positioning as the enterprise AI standard. He notes they’re delivering the best growth and profitability in all of software. A rather sweeping statement, but one can’t deny the numbers are… compelling. It’s almost enough to make one believe the hype.

Loading widget...

The Bearish Counterpoint: A Most Uncomfortable Valuation

The bear case, quite simply, revolves around valuation. The stock trades at 105 times sales – a figure that is ten times higher than the software industry average and three times higher than any other stock in the S&P 500. One suspects someone has been indulging in a bit of fanciful accounting. Historically, only seven other US software stocks have achieved such a ratio, and they all suffered declines of at least 67% after their peaks. A rather ominous statistic, wouldn’t you agree?

Mark Giarelli at Morningstar points out that Palantir’s price-to-sales ratio represents a 350% premium to other artificial intelligence companies. He also expresses concern about the poor risk-reward profile, stating that revenue would need to increase 45% annually for five years to justify the current price. One suspects Mr. Giarelli is a pragmatist. A rare quality these days.

Rishi Jaluria at RBC Capital consistently maintains a bearish stance on Palantir. He believes the addressable market is limited to large, complex companies due to its focus on bespoke solutions. He predicts commercial revenue will grow 15% annually, making the current valuation unsustainable. A perfectly reasonable assessment, though lacking a certain… panache.

And then there’s Michael Burry, the fund manager famous for predicting the 2008 financial crisis. He’s taken a sizable bet against Palantir, investing two-thirds of his $1.4 billion portfolio in put options. He argues the software isn’t unique and the stock is too expensive. One suspects Mr. Burry enjoys a good contrarian position.

The overall picture is, as always, complicated. Palantir has consistently delivered strong financial results, and the AI platform market is forecast to expand rapidly. However, the valuation is… challenging, to say the least. History suggests a correction is likely. One recommends a cautious approach. Perhaps a very small position, just to observe the spectacle. One wouldn’t want to miss the fireworks.

Read More

2026-01-19 11:52