Palantir Technologies, a data analytics and artificial intelligence company, saw its stock surge by 50% since the presidential election. However, this recent rally may not be sustainable due to its high valuation. The company’s revenue grew 44% year-over-year in the third quarter, with commercial business growing 54%. Despite its strong growth rate, Palantir’s forward price-to-earnings multiple of 143 is significantly higher than the S&P 500 and industry leader Nvidia.
Investors should focus on the company’s fundamentals rather than its government contracts, which may be a minor contributor to revenue. The company’s overall financial position suggests it can hold its own in highly competitive generative AI and data analytics opportunities. However, with a high valuation, Palantir is considered too expensive, even considering its healthy growth rate.
In comparison, the S&P 500 has a forward estimate of around 25, and Nvidia has a forward price-to-earnings multiple of just 36, despite boasting a significantly faster top-line growth rate. This suggests that Palantir is poised for a significant correction over the next 12 months. As such, potential investors should tread with caution.
Palantir’s unique approach to AI, focusing on tailor-made solutions for security, sets it apart from cloud computing giants like Microsoft and Snowflake. The company offers three core platforms: Gotham, Foundry, and Artificial Intelligence Platform (AIP). While its role in the previous Trump administration helped boost optimism for its stock, investors should look beyond this factor to assess the company’s overall potential.
Source: https://finance.yahoo.com/news/where-palantir-stock-1-230000971.html