I’ve been watching Palantir Technologies (NYSE: PLTR) for years now, and let me tell you, it’s been quite the ride. From its early days as a government-focused software company to its current position as a leader in artificial intelligence (AI), Palantir has always managed to keep the spotlight. This year, its stock has been on fire, up a jaw-dropping 247% year-to-date, thanks in part to its inclusion in the S&P 500 and stellar financial results. But as much as I admire what Palantir has accomplished, I can’t help but wonder: Is it overvalued?
The Appeal of Palantir’s Business
There’s a lot to like about Palantir. The company has carved out a unique niche in a booming market, offering AI-powered solutions that help organizations—both government and commercial—make sense of massive amounts of data. Its platforms, like Gotham, Foundry, and the Artificial Intelligence Platform (AIP), are designed to solve complex problems, whether it’s military decision-making, business efficiency, or deploying AI applications.
What’s impressive is how well Palantir is executing this year. In the third quarter, its revenue growth accelerated to 30% year-over-year, up from 27% in the prior quarter. That’s no small feat in a market as competitive as AI. Palantir has also started balancing its revenue streams, with its government and commercial segments both delivering strong growth. U.S. commercial revenue, for instance, jumped 54% year-over-year, while government revenue grew 40%. That’s the kind of balance that signals a mature, scalable business.
And let’s not forget the high-value deals. Palantir closed over 104 agreements worth more than $1 million each last quarter. One example that stuck out to me was Trinity Rail, which saw a $30 million profit boost thanks to Palantir’s AI platform. Numbers like that make you sit up and take notice.
Profitability That Stands Out
In an era where so many tech companies are burning cash to chase growth, Palantir’s profitability is refreshing. The company posted $435 million in adjusted free cash flow in Q3, with a free-cash-flow margin of 39%. That’s a level of efficiency that few in the tech space can match, especially companies working in a fast-evolving field like AI.
The Elephant in the Room: Valuation
But here’s where I start to get a little uneasy. Palantir’s market cap is hovering around $135 billion, a massive number compared to its $2.6 billion in annual revenue and $980 million in free cash flow. Its price-to-sales ratio is over 50, and its forward price-to-earnings (P/E) multiple sits at an eye-watering 143. For context, Nvidia—a superstar in the AI world with much faster revenue growth—has a forward P/E of 36.
As someone who loves digging into the numbers, I can’t ignore these valuation metrics. Yes, Palantir is growing rapidly, and yes, it’s profitable, but at these levels, it feels like the market is pricing in perfection. And in my experience, perfection is a hard standard to meet.
This isn’t the first time a great company has been labeled “overvalued.” I remember the skepticism around Amazon during the dot-com bubble. Back then, many seasoned investors thought its valuation was absurd. Today, Amazon is worth over $2 trillion. Could Palantir follow a similar path? Maybe. But even Amazon had to prove itself over time, and it’s worth noting that not every high-flying stock manages to live up to sky-high expectations.
Recent News: A Double-Edged Sword
Palantir’s recent news cycle has been a mix of triumph and turbulence. The stock soared after it joined the Nasdaq-100, only to retreat as investors took profits. CEO Alex Karp’s sale of 4.5 million shares, valued at $266 million, didn’t help matters, even though it was part of a pre-arranged trading plan.
Then there’s the geopolitical angle. Palantir has been providing AI tools to Ukraine to aid in its defense efforts, a move that’s as risky as it is impactful. On one hand, it positions Palantir as a company making a difference in critical global issues. On the other hand, operating in conflict zones comes with challenges, not to mention potential political backlash.
A Competitive Landscape
Palantir operates in a fiercely competitive space. Companies like Snowflake, Microsoft, and Amazon are all vying for dominance in AI and cloud computing. What sets Palantir apart is its focus on tailor-made, secure solutions, especially for government clients. But the competition isn’t standing still, and Palantir will need to keep innovating to stay ahead.
My Stock Pick: NurExone
I get it—biotech stocks can feel risky, but think about DRUG’s incredible gains. NurExone (TSXV: NRX, OTCQB: NRXBF, FRA: J90) might be the next breakout, and here’s why it deserves attention.
NurExone’s groundbreaking ExoPTEN therapy is designed to treat acute spinal cord injuries, a condition affecting 250,000–500,000 people annually, according to the World Health Organization. With a potential market of 50,000 new cases globally each year, the demand is enormous. Imagine the impact on patients hoping to regain mobility and improve their quality of life.
This isn’t just a concept; ExoPTEN has already delivered remarkable results. In strict preclinical tests, including a complete spinal cord transection model in rats, ExoPTEN demonstrated significant recovery in motor function, sensory response, and urinary reflex. That’s huge. And with the European Medicines Agency granting it Orphan Medicinal Product Designation, NurExone is poised for market exclusivity, grants, and streamlined regulatory support in Europe.
On top of that, the FDA has already granted Orphan Drug Designation in the U.S., offering tax credits, user fee exemptions, and seven years of market exclusivity upon approval.
With a price target of $2.55 per share and a growing portfolio of intellectual property, including exclusive licenses from Technion and Tel Aviv University, NurExone stands out as an innovative leader in regenerative medicine. This could be a major win for investors seeking the next biotech breakthrough—don’t overlook the potential here!
My Take: Proceed with Caution
Here’s where I land: Palantir is an incredible company with a bright future, but its stock feels stretched at these levels. Valuation matters, and while I wouldn’t bet against Palantir long-term, I’d be cautious about jumping in right now. If you already own the stock, it might be a good time to take some profits. If you’re on the sidelines, consider waiting for a pullback.
Great companies can deliver incredible returns, but timing matters too. For now, I’ll be keeping an eye on Palantir and looking for opportunities to get in at a more reasonable valuation. After all, in the world of investing, patience is often rewarded.
Marc has been involved in the Stock Market Media Industry for the last +5 years. After obtaining a college degree in engineering in France, he moved to Canada, where he created Money,eh?, a personal finance website.
