Palantir stock: is it okay to ignore its P/E multiple?
Palantir Technologies Inc (NASDAQ: PLTR) faces significant stock valuation concerns despite reporting a strong quarter and raising its full-year guidance. Currently trading at nearly 450x forward earnings, its valuation is viewed as unsustainably high by analysts, especially when compared to AI leader Nvidia, which has a forward P/E multiple of only 48. Analysts from Jefferies and Freedom Holding warn that Palantir's stock is vulnerable to sharp declines if the AI hype cycle weakens, highlighting its 'extreme' and 'impossible to ignore' valuation. Though Palantir’s AI solutions are gaining traction across sectors, overvaluation leaves little room for error, raising questions about its long-term investment appeal relative to more reasonably priced AI stocks.
Palantir Reports Strong Quarter Amid Valuation Concerns
Palantir Technologies Inc (NASDAQ: PLTR) is tumbling this morning despite reporting another blockbuster quarter and raising its guidance for the full year. The primary reason is valuation concerns. At nearly 450 times forward earnings, PLTR shares are priced for perfection – and then some. While the stock is up over 150% year-to-date, concerns linger about whether this valuation is sustainable in the long term, or if it is a time bomb set to go off next year.
Palantir vs Nvidia: A Tale of Two Multiples
PLTR stock is currently among the most expensive S&P 500 names. Even the undisputed AI leader, Nvidia, trades at a forward P/E multiple of just 48 compared to Palantir's stretched valuation. Loop Capital analysts believe that the 'golden wave' of artificial intelligence will help Nvidia grow rapidly and achieve a market cap of $8.5 trillion in the coming years. Even if Nvidia were to simply maintain its current earnings trajectory, its P/E ratio would still remain much lower than Palantir’s today. This stark comparison underscores the extreme valuation for PLTR, especially given Nvidia’s greater earnings power and market dominance.
Jefferies Flags Extreme Valuation Risks
Jefferies analyst Brent Thill sees Palantir’s valuation as 'extreme' and unsustainable. In a post-earnings note, Thill highlighted that even in a bullish scenario—where Palantir accelerates to a 60% 4-year CAGR—the stock would still need to trade at 27x CY28E revenue just to justify its current price. Thill warned that Palantir’s stock price is super vulnerable to a sharp decline if the AI hype cycle cools, maintaining an ‘underperform’ rating and predicting a >55% drop to $70 by late 2026.
Freedom Holding Labels Palantir's PE Ratio 'Impossible to Ignore'
Freedom Holding’s senior analyst Almas Almaganbetov echoed similar concerns regarding the unsustainable valuation of Palantir. Speaking on Tuesday, Almaganbetov argued that the market is pricing in long-term hypergrowth that is impossible to sustain indefinitely. At nearly 450x forward earnings, the valuation creates a buffer of disappointment, where even strong results could trigger a sell-off. The analyst further emphasized that ignoring Palantir’s valuation is no longer feasible given the stark mismatch between market expectations and reality.
Conclusion: A High-Risk Bet on AI
There is no doubt that Palantir is executing well. Its AI-enabled software continues to gain traction across government and commercial sectors, with strategic partnerships with companies like Nvidia, Snowflake, and Lumen further reinforcing its relevance. However, even the best companies can be overvalued. While Palantir may benefit from ongoing AI tailwinds, investors must ask whether there are more reasonably priced opportunities to capitalize on this trend. At current levels, PLTR stock leaves little room for error, making it a risky bet in a market that is quick to punish any missteps.