In 2024, the data and AI company Palantir (PLTR) bucked the usual trend by soaring over 340%, quadrupling its share price. Given such an extraordinary increase, one might expect a cooling off period in 2025. However, quite the opposite has happened; shares have surged by over 105% this year alone, pushing the tech stock’s total gain since the beginning of 2024 to approximately 800%.
As I stand by, observing the stocks trading at unprecedented peaks, I find myself pondering the question: To invest further, or to tread with caution? The allure of buying more shares in hopes that this upward trend persists is undeniable. Yet, the wise investor within me urges a more measured approach. Should we choose to hold onto our current stocks, or perhaps even consider selling some, if only for a moment of reassurance and security amidst the market’s unpredictable dance?
Soaring sales
One significant advantage Palantir holds is its robust top-line expansion. In the first quarter, the tech firm reported revenue of $884 million, marking a 39% increase compared to the same period last year. Notably, this signifies a faster pace than the 36% year-over-year growth recorded in the preceding quarter, demonstrating the company’s ongoing momentum.
In Q1 of 2025, US revenue growth for Palantir surged by 55% compared to the previous year, contributing $628 million to the overall quarterly income. This indicates the significant role of the U.S. market for Palantir, as it accounts for a large portion of their earnings. Notably, commercial and government revenue both saw impressive gains – a 71% rise in commercial revenue year-over-year and a 45% increase in government revenue.
From an external perspective, I observe that in their latest quarterly report, Palantir highlighted a remarkable achievement: they sealed 139 deals surpassing the $1 million mark, 51 deals reaching the $5 million threshold, and a significant 31 deals exceeding the $10 million benchmark.
Following the impressive outcomes they’ve achieved, management feels reassured enough to increase their full-year earnings forecast. They now predict that the company’s revenue for 2025 will be between $3.890 billion and $3.902 billion. This is a significant jump from approximately $2.9 billion in 2024. In other words, the middle point of their projected 2025 revenue suggests an estimated growth of around 36%.
The substantial increase in revenue is significantly boosting earnings for Palantir. In Q1 alone, their net income reached a staggering $214 million, nearly doubling last year’s profit of around $106 million from the same period.
Alexander Karp, Palantir’s co-founder and CEO, implied during the company’s first-quarter earnings call that they are only just beginning to experience significant growth, with a particularly noticeable surge in software adoption within the U.S. market. He described their software as the foundation for modern enterprises operating in an era defined by artificial intelligence.
A valuation problem
Although Palantir’s growth trajectory is undeniably strong, investors face a significant challenge: It appears the market has already accounted for faster growth over an extended period.
Currently, Palantir’s market value is approximately $365 billion, which is over 93 times the maximum projected revenue for the full year 2025 as per the company’s guidance. In terms of its trailing-12-month sales, Palantir has a price-to-sales ratio of 123. This is an impressive figure, considering it’s typically high even when comparing to a price-to-earnings ratio.
And what is Palantir’s price-to-earnings ratio? It’s 672. Yes, you heard that right.
In simpler terms, it seems clear that the stock price has been raised so high by investors that it reflects the maximum positive expectations for this company.
When it comes to investing in Palantir, the choice is a matter of personal judgment. Nevertheless, if this stock were mine, I would choose to sell. For those who don’t own any shares yet, I would suggest steering clear of them at their current price. However, there’s always the chance that Palantir may surpass my most optimistic predictions. Despite this, I strongly believe that there are potentially more lucrative and safer investment opportunities available for investors to consider.
It’s worth noting that Palantir is an impressive firm. However, the anticipation surrounding it might be overly optimistic. Potential investors could prudently hold off on purchasing shares until a more favorable buying opportunity arises.
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2025-07-20 03:36