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Palantir has a lot of potential but the current valuation already prices this in (and more).

P/E Ratio: Current P/E ratio of 237.8 isn't sustainable. I expect this to reduce over time and align more closely with the Software Industry's P/E ratio of 32. I've given Palantir a higher P/E ratio as this valuation is based on a 5 year time horizon.

Net Profit: Current net profit margins of 16.32% are impacted by high operating expenses. I expect revenues to outstrip cost growth with a 5 year time horizon so I've increased the net profit margin in 2029 to 20%.

This is a stock I'd continue to add to but not at this valuation. I'd like to add to my position at a P/E ratio much closer to the industry average.

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Disclaimer

The user AlexLovell has a position in NasdaqGS:PLTR. Simply Wall St has no position in any of the companies mentioned. The author of this narrative is not affiliated with, nor authorised by Simply Wall St as a sub-authorised representative. This narrative is general in nature and explores scenarios and estimates created by the author. The narrative does not reflect the opinions of Simply Wall St, and the views expressed are the opinion of the author alone, acting on their own behalf. These scenarios are not indicative of the company's future performance and are exploratory in the ideas they cover. The fair value estimates are estimations only, and does not constitute a recommendation to buy or sell any stock, and they do not take account of your objectives, or your financial situation. Note that the author's analysis may not factor in the latest price-sensitive company announcements or qualitative material.