Palantir: A Most Peculiar Valuation

by

Palantir Technologies, a name that sounds suspiciously like a character from a forgotten gothic novel, has offered its shareholders a brief, flickering hope, quickly extinguished. The quarterly pronouncements were, for a moment, deemed ‘stellar’ – a word that, in the financial world, often precedes a precipitous decline. It’s down roughly a third from its peak, and still trades at a multiple that would make even a seasoned conjurer raise an eyebrow.

One is compelled to ask: what precisely are we valuing? Not merely revenue, certainly. Revenue is a crude measure, like judging a masterpiece by the amount of canvas it consumes. No, we’re valuing a promise. The promise of artificial intelligence, naturally. A field currently populated by more charlatans than genuine visionaries, and where the line between the two is vanishingly thin. Palantir, it seems, is attempting to deliver on this promise, a feat akin to teaching a cat to play the violin.

The Edge of a Blade

The software world is currently experiencing a rather undignified scramble. Investors, those eternally anxious creatures, are scrutinizing each offering with the intensity of a pathologist examining a particularly perplexing specimen. Palantir, however, is attempting to differentiate itself. It’s not merely selling AI; it’s claiming to deliver results. Customers, it appears, are reaching out proactively, signing deals that grow larger with each passing month. The U.S. commercial revenue grew by a rather astonishing 137% last quarter, reaching $507 million. A figure that, one suspects, is being massaged with the same care and precision as a political speech.

Loading widget...

Once a company tastes the fruits of success – and, let’s be honest, a 137% increase is rather fruity – it tends to scale. Lear, a name redolent of tragedy, has expanded its Palantir usage from a mere 100 souls and four applications to a staggering 16,000 users and 280 applications. One wonders if they’ve considered the logistical nightmare of managing such an expansion. The top twenty customers, it’s reported, now contribute $94 million each. A rather unsettling concentration of power, wouldn’t you agree?

But the true measure of a platform, it seems, is the number of custom applications built upon it. Palantir boasts over a billion requests per week via its API. A truly staggering number. It’s as if the platform is breeding, spawning new applications with alarming speed. The more apps, the stickier the platform, the more valuable… and the more difficult it becomes to escape its grasp. One begins to suspect a subtle form of digital enslavement.

The Price of Dreams

The valuation, however, remains a matter of considerable concern. The price-to-sales ratio peaked at an almost obscene 137 last year and currently stands at a still-lofty 75. It’s as if the market has collectively decided to ignore the laws of gravity. No company, not even the most visionary, can sustain such a valuation indefinitely. The higher it climbs, the more precarious its position becomes. Even if revenue continues to grow at a respectable clip, the multiple is likely to compress. And when it does, the stock could fall. Swiftly.

Analysts predict a compound annual growth rate of 47% through 2028. A respectable figure, to be sure. But investors should not expect the stock to mirror that growth. The market, alas, is rarely so accommodating. A market-beating return over the next decade is possible, but it will likely be more modest than the fireworks of the past few years. One should approach with caution, lest one be consumed by the flames.

One could wait for a cheaper price, naturally. But waiting for the bottom is a fool’s errand. Palantir looked “expensive” even at the previous market low in 2022. A small position, built over time, might be the wisest course. One must allow for the possibility that the stock may need to settle into a more realistic valuation before it can truly take off. Patience, as always, is key. Palantir possesses the competitive edge to sustain growth, but even the most potent magic requires time to brew.

Read More

2026-02-10 15:52