Palantir: A Rather Pricey Prediction Machine

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Let’s talk about Palantir [PLTR 4.83%]. It’s a company that sounds like it should be building impenetrable fortresses in Eastern Europe, but is, in fact, an artificial intelligence and data analytics platform. Which, admittedly, is quite a bit more lucrative these days. They recently reported some truly impressive fourth-quarter results – a 70% jump in revenue, year over year. A rather astonishing figure, when you think about it. And their guidance suggests things are only accelerating. They’re positively brimming with confidence, declaring themselves smack-dab in the middle of a ‘tectonic shift’ in software adoption. One almost expects them to start issuing earthquake preparedness kits alongside their data solutions.

So, why the lingering skepticism? Well, it boils down to valuation, that most elusive of metrics. The price of Palantir stock seems to be based on the assumption that they’ve already solved all of humanity’s problems, and are now simply collecting the accolades (and profits). There’s precious little margin for error, and even less room for a simple, perfectly normal deceleration in growth. It’s a bit like pricing a vintage wine based on the expectation that it will improve with age, indefinitely. A risky proposition, to say the least.

Now, before anyone accuses me of being a spoilsport, let me be clear: Palantir is a genuinely good company, run by exceptionally capable people. They’re doing interesting work, and executing it remarkably well. But sometimes, when a company finds itself at the center of the market’s most fervent investment fantasies, its stock price gets a little… carried away. Over the past three years, shares have soared by over 1,600%. That’s a return that would make even a seasoned gambler blush. It’s enough to make one suspect they’ve discovered the secret to alchemy, rather than simply mastering data analytics.

The Accelerating Trend

Palantir’s revenue isn’t just growing; it’s picking up speed, like a runaway train. First quarter growth in 2025 was 39%, escalating to 48%, then 63%, and finally a rather robust 70% by the fourth quarter. It’s the sort of trajectory that makes investors salivate. And their profitability has recently taken a pleasing turn. Net income in 2025 jumped over 250% year-over-year, reaching $1.625 billion. One almost expects them to start printing money, alongside their data solutions.

But What If the Music Stops?

Here’s the rub. The stock’s price-to-earnings ratio, currently hovering around 200, implies a continuation of this extraordinary growth for years to come. Consider the market capitalization. As of this writing, Palantir is valued at over $306 billion, despite trailing-12-month sales of approximately $4.5 billion and net income of $1.6 billion. The gap between these figures is… substantial. It’s like valuing a perfectly serviceable bicycle as if it were a spaceship.

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Even using the forward price-to-earnings ratio – a measure that attempts to account for future earnings – the stock remains expensive, clocking in around 110. A valuation like this could prove disastrous if growth begins to slow. And while their first-quarter guidance suggests a slowdown isn’t imminent, it’s not entirely implausible. Consider their total contract value (TCV) – essentially, the potential lifetime value of their customer contracts. While still impressive, it’s decelerating. Q4 saw 138% growth, down from 151% in Q3. A minor deceleration, perhaps, but a deceleration nonetheless. It’s a bit like noticing the hairline is receding, even if only slightly.

Of course, 138% growth in closed TCV is hardly a cause for alarm. Management deserves considerable credit. But if this deceleration continues throughout 2026, it could signal slower revenue growth down the line. It’s a subtle shift, but one worth noting.

Overall, Palantir’s business continues to perform admirably. But there’s a price for everything, and the price for Palantir stock feels, at present, rather extravagant. It’s entirely possible they’ll deliver the extraordinary growth required to justify their valuation and reward shareholders handsomely. But at the current price, I believe the risk outweighs the potential reward. It’s a fascinating company, undoubtedly. But sometimes, the most interesting things are best observed from a safe distance.

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2026-02-13 07:22