Palantir Technologies Inc. (NYSE: PLTR) has delivered a stunning stock market performance over the past year, driven by surging demand for its AI-powered platforms in both government and commercial sectors. As of May 24, 2025, PLTR shares closed at $123.31 – representing a 63% gain year-to-date and an extraordinary 400+% increase over the past 12 months. In just the last month, the stock surged by over 40%, underscoring investor enthusiasm for the company’s AI-driven capabilities. Palantir reported a 36% year-over-year revenue jump in Q4 2024 to $828 million and has guided for full-year 2025 revenues between $3.74 billion and $3.76 billion. While the company’s top-line growth and market momentum are undeniably strong, concerns about valuation remain front and center.
When compared with its peers, Palantir’s outperformance becomes even more striking. Tyler Technologies has posted a modest 12% year-to-date gain and a 20% rise over the past year, thanks to steady demand in public-sector software. Verint Systems has declined roughly 15% YTD and 25% over the past year amid scaling challenges. Datadog, a strong player in the cloud monitoring space, has gained 28% YTD and 45% over 12 months, while Alteryx has struggled, with its stock falling 40% year-to-date and over 60% in a year. In contrast, Palantir’s near-parabolic rise showcases the market’s bullish outlook on its AI potential – but also raises questions about sustainability. In this thorough assessment, we investigate whether one should Buy or Fear Palantir Technologies stock. That said, if you seek upside with lower volatility than from individual stocks, the Trefis High Quality portfolio presents an alternative, having outperformed the S&P 500 and generated returns exceeding 91% since its inception.
Image by Mariia Shalabaieva – Unsplash
Valuation: A Stretched Multiple
One of the most glaring red flags around Palantir stock is its valuation. At a price-to-sales (P/S) ratio of 101.5 (compared to the S&P 500’s average of just 2.8) PLTR is trading at a valuation premium that few companies can justify over the long term. Investors are effectively paying over 100 times current revenues – a level that implies not only continued growth but near-flawless execution. Our detailed analysis of PLTR’s valuation provides a breakup of various factors driving its valuation.
Growth: Rapid and Robust
Palantir’s growth story is undeniably compelling. Over the past three years, the company has grown its top line at an average annual rate of 23%. In the last twelve months, revenues increased by 28.8%, from $2.2 billion to $2.9 billion. Its most recent quarterly results were even stronger, with a 36% jump year-over-year. These figures reflect Palantir’s deepening penetration into commercial sectors and its continued strength in government contracts.
Profitability: Mixed but Improving
While profitability metrics are less dazzling, they still indicate a solid operational base. Operating income over the past four quarters was $310 million, equating to a modest 10.8% margin. However, the company generated a strong $1.2 billion in operating cash flow, translating to a 40.3% OCF margin. Net income totaled $462 million for the period, yielding a moderate 16.1% net income margin. This mix suggests healthy cash generation, albeit with room to improve its operational efficiency.
Financial Stability: Rock-Solid
Palantir’s balance sheet is a major strength. With just $239 million in debt and a massive market cap of $273 billion, the company boasts a debt-to-equity ratio of just 0.1%. Furthermore, it holds $5.2 billion in cash and equivalents – making up 82.5% of its total $6.3 billion in assets. Such liquidity provides a strong cushion against market volatility and gives Palantir significant strategic flexibility.
Downturn Resilience: A Cause for Concern
Despite its many strengths, Palantir has a troubling history of underperformance during economic downturns. During the 2022 inflation shock, the stock plummeted 84.6%, while the S&P 500 fell just 25.4%. Similarly, during the COVID-19 pandemic, Palantir dropped 53.9%, compared to the broader index’s 33.9% decline. While the stock has since rebounded and surpassed its prior highs – reaching $130.18 in May 2025 – its history suggests vulnerability to macroeconomic shocks.
Strong Fundamentals, Expensive Entry Point
There is little doubt that Palantir is executing well and has carved out a leadership position in AI-driven analytics. Its growth trajectory, cash generation, and financial resilience make it one of the stronger players in the space. However, its valuation metrics remain extremely high by any historical or sector standard. While momentum investors may continue to ride the wave, those with a value-oriented approach might view PLTR as relatively expensive at current levels. As always, potential investors should weigh the company’s tremendous potential against the risks of buying into a highly priced stock.
Investing in a single stock like Moderna can be risky. On the other hand, the Trefis High Quality (HQ) Portfolio, with a collection of 30 stocks, has a track record of comfortably outperforming the S&P 500 over the last 4-year period. Why is that? As a group, HQ Portfolio stocks provided better returns with less risk versus the benchmark index, less of a roller-coaster ride as evident in HQ Portfolio performance metrics.
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
