Palantir (PLTR) Valuation: Is Market Optimism Outpacing Growth Potential?

Palantir Technologies (PLTR) has been on investors’ radars lately, largely thanks to recent stock price volatility that has spurred a wave of new questions about its trajectory. Although there hasn’t been a single big event or headline driving the movement, the shifts in valuation are compelling enough to make shareholders and would-be buyers take notice. Is this just noise, or are we seeing a market rethinking the outlook for one of tech’s more polarizing companies?

This year has already been an eventful one for Palantir Technologies. While the stock has dipped slightly over the last week, the bigger picture tells a different story. Shares have climbed 13% in the past month, surged 30% over the past 3 months, and delivered an eye-catching 382% total return over the past year. That kind of momentum, especially alongside double-digit annual revenue and net income growth, suggests something more is at play than just reactive trading.

With price swings grabbing attention, the real question is whether Palantir’s current valuation gives investors a genuine opportunity, or if the market has already built in all its future growth potential.

Most Popular Narrative: 85% Overvalued

The prevailing narrative sees Palantir as significantly overvalued. Investor enthusiasm is very high, but the stock price may be running well ahead of fundamentals.

Palantir's market capitalization has seen a remarkable growth from $13.365 billion in 2022 to $183.495 billion in 2024. This steep increase, particularly the 391.13% jump from 2023 to 2024, suggests a high level of market optimism. The enterprise value (EV) follows a similar trend, indicating the market's high valuation of Palantir's future potential.

Beneath this surge lies a bold vision for where Palantir could go. Could future revenue growth and margin expansion justify such an aggressive mark-up in value? The narrative's projections are grounded in key assumptions about long-term financial performance and market leadership. Want to know the bullish scenario that drives this outsized premium? The full narrative holds the answers behind the forecast and what could turn the tide in Palantir’s favor.

Result: Fair Value of $96 (OVERVALUE)

Have a read of the narrative in full and understand what's behind the forecasts.

However, price correction could occur if Palantir faces tighter government budgets or heightened competition in AI, which could challenge the lofty market optimism.

Find out about the key risks to this Palantir Technologies narrative.

Another View: SWS DCF Model Says Overvalued Too

Taking a step back from market optimism, our DCF model points to a similar conclusion as the narrative approach. This suggests Palantir is priced for growth that is already assumed by the market. Could this alignment be a warning sign, or is there a surprise in store?

Look into how the SWS DCF model arrives at its fair value.

Simply Wall St performs a discounted cash flow (DCF) on every stock in the world every day (check out Palantir Technologies for example). We show the entire calculation in full. You can track the result in your watchlist or portfolio and be alerted when this changes, or use our stock screener to discover undervalued stocks based on their cash flows. If you save a screener we even alert you when new companies match - so you never miss a potential opportunity.

Build Your Own Palantir Technologies Narrative

If these perspectives do not quite match your own, you are invited to dig into the numbers and quickly craft your own story about Palantir's future. Do it your way

A good starting point is our analysis highlighting 2 key rewards investors are optimistic about regarding Palantir Technologies.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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