Investing

Buy, Sell, or Hold Palantir Stock at Over $100?

Omor Ibne Ehsan

Published: February 5, 2025 12:35 pm

Palantir Technologies (NYSE:PLTR) has been a lightning rod for investor debate over the past few quarters as the stock has surged significantly. It is a niche company that works with the defense and intelligence agencies and the stock has surged over 400% in the past year as these contracts have been very sticky and expanding very fast. The recent growth is mostly due to AI.

Palantir has posted solid report after solid report, and the momentum has been supercharged. That said, PLTR is a pretty polarizing stock. Bulls think its AI infrastructure is becoming the “operating system for enterprises,” with 2025 revenue guidance of $3.74 billion to $3.76 billion, up 31% year-over-year. However, bears believe Palantir’s valuation has gone too far and it is now a bubble, especially after its Q4 report has taken above $100.

First, let’s look at the fundamentals here.

24/7 Wall St. Key Points:

• PLTR stock has been delivering stellar gains over the past few quarters.
• The momentum has accelerated after Q4 earnings trounced Wall Street estimates.
• Should you buy the stock, or should you risk missing out on the rally? Let’s take a look. In the meantime, grab our free “The Next NVIDIA” report. It includes a software stock with 10X potential.

Why Palantir’s Q4 Earnings Report Pushed It Above $100

Palantir’s Q4 2024 earnings trounced estimates and ignited an after-hours rally that pushed it past the $100 mark. Revenue came in at $828 million, up 36% year-over-year.

Palantir is also becoming an AI arms dealer for corporate America. The domestic commercial division saw revenue rise 64% year-over-year to $214 million. Palantir locked in 32 deals worth over $10 million. The U.S. commercial contract value rose 134% year-over-year to $803 million.

Moreover, the government division sales grew 45% year-over-year to $343 million. Last year’s FedRAMP High Authorization allowed it to get a $178 million Army Titan project for battlefield decision-making.

And on top of all that, Palantir posted $517 million in adjusted free cash flow with a 63% margin. Palantir now sits on $5.2 billion in cash reserves.

The U.S. commercial segment alone is expected to post 54% growth and reach $1.079 billion in sales.

The Bull Case for Palantir Stock

Wall Street is only beginning to raise its price target but the current highest price target is at $90. Both Wedbush and BofA have their price target at $90, but PLTR stock has surged above these targets in the post-market rally.

The bull thesis mostly revolves around the company’s Artificial Intelligence Platform (AIP). Wedbush calls this the “Messi of AI” since it can convert pilot projects into enterprise-wide deployments. Wedbush claims the U.S. commercial revenue could double next year due to this.

That said, even bulls doubt the valuation here with the $90 price target.

The Bear Case for Palantir Stock

Palantir’s AI-driven rally has pushed valuations to nosebleed levels, and even many PLTR bulls would agree. RBC has a $11 nuclear scenario and Jefferies has a more reasonable $28 target.

There’s no other software stock that comes even close to the multiples you’re paying. Bears note this multiple mirrors the 2021’s COVID bubble peak. Besides, CEO Alex Karp and executives have offloaded billions in shares since September 2024.

But again, the bears here have been proven wrong time and time again in the past few months. If the broader AI rally continues running hot in the coming months, they’ll continue to miss out on the gains here.

Alex Karp said, “We are still in the earliest stages, the beginning of the first act, of a revolution that will play out over years and decades.” On AI commoditization: “Our early insights surrounding the commoditization of large language models have evolved from theory to fact.”

Karp is likely right that things are going to evolve rapidly over the coming decades. But you should remember that there will be many ups and downs in the coming decades and industry leaders change rapidly. A stock like PLTR will likely see many 50%+ corrections over that period, and you’re more likely to be near the peak right now.

Should You Buy PLTR Stock?

You’re paying 200 times forward earnings and 59 times forward sales. Palantir is expected to grow sales by 25% to 26% this year, along with 27% to 28% EPS growth. Palantir beat EPS estimates by 23.72% and revenue estimates by 5.92% in Q4, and even if it beats next year’s estimates with those numbers, the stock is still ridiculously expensive. PLTR stock seems to be feeding off of the AI frenzy, and there’s a good chance the tech sector is due for a correction.

The question is: do you think the AI rally will get even more manic? If so, PLTR is a solid buy. It will probably deliver amplified gains compared to the broader market. Conversely, if you think that the tech correction is close, then I wouldn’t go anywhere near PLTR. The valuation is clearly bloated, so this is not a stock you want to hold during a market correction.

Taking profits seems to be a much better idea at current valuations.