Palantir $PLTR is extremely overpriced.

1. Valuation Metrics Are Sky-High
Palantir currently trades at a Price-to-Sales (P/S) ratio of approximately 53.13, significantly higher than industry peers.

GuruFocus Even for a growth company, this level of valuation is extreme and implies future growth rates that may be unattainable.

2. Revenue Growth Isn’t Scaling as Expected
While Palantir’s revenue growth has been solid, it’s showing signs of deceleration:

  • FY 2022: 24% year-over-year growth
  • FY 2023 (projected): 18% year-over-year growth

This deceleration doesn’t justify its premium valuation. Additionally, the company remains heavily reliant on government contracts, which are often lumpy and unpredictable.

3. Profitability Is Still Questionable
Despite boasting about achieving GAAP profitability recently, Palantir has heavily relied on stock-based compensation (SBC). In fact, SBC accounted for approximately 30% of their operating expenses last quarter, which dilutes shareholder value and raises questions about true profitability.

4. AI Hype Is Inflating the Bubble
The market has been overly optimistic about Palantir’s AI capabilities. While their AI Platform (AIP) sounds promising, actual adoption metrics and revenue contribution from AIP remain vague. It’s easy to talk AI; it’s harder to monetize it sustainably.

5. Insider Selling Signals Lack of Confidence
Executives have been offloading shares at a significant rate. For instance, Chairman Peter Thiel sold a substantial portion of his holdings recently.

Yahoo FinanceIf the leadership team doesn’t see long-term upside at these prices, why should we?

6. Competitive Pressure Is Mounting
Palantir operates in a crowded space with competitors like Snowflake ($SNOW), Databricks, and Microsoft ($MSFT) offering similar or better solutions. Palantir’s dependence on government clients limits its commercial reach in comparison.

TL;DR:
Palantir is an interesting company with solid tech, but the stock price is disconnected from fundamentals. High valuations, slowing growth, heavy SBC, and reliance on government contracts make $PLTR a risky bet at current levels. AI hype has driven the price into bubble territory, and insiders don’t seem confident in its future.

What do you think? Is $PLTR worth its valuation, or are we seeing another overhyped tech bubble? Let’s discuss! 👇

Note: All financial figures are based on the latest available data as of November 2024.

Sources