Palantir Technologies’ stock price may decline significantly in the near future due to valuation risks. The company’s valuation is currently at a high level, with earnings multiples ranging from 300 to 220 times projected sales. However, this growth may slow down, and investors are optimistic about Palantir’s expansion into the commercial market.
Several factors have contributed to Palantir’s recent increase in stock price, including interest in generative AI and the re-election of Donald Trump as U.S. President. Nevertheless, markets often focus on short-term trends and extend them into the future, anticipating long-term growth.
Palantir’s volatility is high compared to the S&P 500, with annual returns ranging from -23% to 340%. The company’s revenue growth has accelerated, but this may slow down due to factors such as government contract unpredictability. Palantir relies heavily on government sales, which presents risks.
The company’s expansion into the commercial market offers a larger opportunity than the government sector. However, challenges remain, including competition from major tech companies and limited scalability among small and medium-sized businesses. If revenue growth slows down, this could impact Palantir’s valuation.
Analysts project a 32% growth rate for FY’25, but a slowdown to 10% annual growth over the next two years could result in revenues reaching only $4.6 billion by FY’27. Additionally, if margins decline from 36% to 32%, net income growth may slow down, and investors may reevaluate Palantir’s growth potential.
Historically, Palantir’s valuation multiples have compressed rapidly, with a significant decline in stock price. If these risks materialize, a correction could be on the horizon, potentially resulting in a 50% decline to approximately $62 per share.
Source: https://www.forbes.com/sites/greatspeculations/2025/02/20/palantir-stock-to-crash-50