Avoid investing in Palantir shares initially, experts advise cautiously
In the world of technology stocks, Palantir Technologies (WKN: A2QA4J) stands out as one of the leading AI players, with its shares up around 150% year-to-date. The company, known for its data analytics and AI software, has a market capitalization of approximately €165 billion, revenues around €2.57 billion, and EBITDA of about €385 million as of mid-2025.
However, the high valuation of Palantir Technologies is a cause for concern for potential investors. The stock is trading at very high price-to-earnings (P/E) ratios, with a 2025 P/E estimated around 476x and a 2026 P/E around 355x. This valuation level suggests significant risk if growth slows or market conditions change.
The company's strong revenue growth and improving profitability have been driven by high demand for its services, especially in the U.S., which has resulted in record business activity. Palantir's role as a data specialist, helping governments and companies analyze their data and derive value from it, has made it a key player in the cybersecurity space.
Investor caution is advised primarily because valuations have decoupled significantly from traditional financial metrics, making the stock more sensitive to any signs of underperformance or broader market volatility. Additionally, political factors such as the CEO Alex Karp's public endorsement of Donald Trump might introduce volatility but could also lead to potential governmental contract opportunities.
Analysts at Raymond James have downgraded the Palantir stock, stating that it needs to consolidate its impressive earnings of the past years and justify its high valuation. Most analysts are skeptical about the Palantir stock due to its high valuation, with its price-to-earnings ratio currently well above 100.
Despite these concerns, Palantir Technologies' earnings per share for the full year could jump by over 270% to $0.36. In the third quarter, revenue could rise by 26%, and for the full year, revenue is expected to grow by 24% to $2.76 billion.
The new "AIP" (Artificial Intelligence Platform) platform, introduced last year, is in high demand and is seen as one of the main drivers of the stock's price. However, the exceptionally high valuation multiples present a risk that investors must weigh carefully, especially if future growth does not meet elevated expectations.
Potential investors should consider valuation risks alongside growth prospects and monitor upcoming earnings reports closely for confirmation of sustained performance. As of today, November 4, Palantir is releasing new quarterly results, providing an opportunity for the company to reassure investors about its growth trajectory and justify its high valuation.
It's important to note that the CEO and majority shareholder of the publisher Börsenmedien AG, Mr. Bernd Förtsch, has direct and indirect positions in Palantir Technologies. Four analysts recommend buying Palantir stock, ten recommend holding, and seven recommend selling, reflecting the mixed sentiment among analysts. With a beta of 2.72, Palantir Technologies is considered extremely risky.
In conclusion, while Palantir’s strong growth and strategic positioning support optimism, the high valuation multiples present a risk that investors must weigh carefully, especially if future growth does not meet elevated expectations. Potential investors should consider valuation risks alongside growth prospects and monitor upcoming earnings reports closely for confirmation of sustained performance.
The high valuation of Palantir Technologies, despite its strong growth and strategic positioning in the technology and AI sector, has raised concerns among potential investors, as the stock's price-to-earnings ratios are significantly high and could lead to significant risk if growth slows or market conditions change. The new Artificial Intelligence Platform (AIP) is a driving factor for the stock's price, but its exceptionally high valuation multiples need careful consideration, especially if future growth does not meet elevated expectations.
