To The Moon

$Palantir Technologies Inc.(PLTR)$

PLTR is a highly debated stock. On one side, analysts are optimistic, with some pointing to its position in the "sweet spot" due to expected large federal AI spending. For instance, well-known analyst Dan Ives believes the company could reach around $90 within the next year and sees it continuing to outperform. Although he acknowledges that its current valuation is high, he predicts it could evolve into a company like Oracle or Salesforce over time. He also anticipates that the Trump administration’s federal spending will provide significant benefits, leading to strong returns for Palantir both in the short and long term.

On the other hand, some analysts, like those at Jefferies, have a much lower target price, valuing the stock at $28. While they acknowledge the impressive performance in 2024, they believe the stock will underperform in 2025, citing the inflated valuation, changing interest rates, and the slowdown of the AI hype. They also point to ongoing insider selling as a negative factor for the stock.

Morningstar has a similar cautious view, with a lower valuation of around $21 for Palantir. They believe the company lacks a significant competitive moat, classifying it as having a narrow moat instead of a wide one. This adds to the uncertainty surrounding the company.

Despite these differing opinions, one undeniable fact is Palantir’s incredible performance over the past 12 months, up 372%. However, it’s now trading near the top of its 52-week range, and for the first time in a while, Seeking Alpha has issued a sell rating on the stock. Wall Street analysts are generally recommending a hold, but the Quant ratings are on the fence, nearly at a buy level.

In recent months, Palantir has outperformed even giants like Microsoft, with an 84% increase in value. The big question now is whether this is a bubble about to burst or if the company will continue its upward trajectory.

Last Earning Overview

Palantir is expected to report earnings after market close on February 3rd. Analysts are anticipating a 40% year-over-year increase in earnings per share (EPS) for Q4 and double-digit growth in the following three quarters. The company has consistently met management targets over the past four quarters, which is promising. However, with a forward P/E ratio of 165, Palantir is still trading at an extremely high valuation, well above the sector median of 26.4. This means investors are paying a 688% premium compared to its sector peers.

Revenue and Growth

Despite the strong growth and profitability, there are concerns about the stock’s current valuation, which sits 69% above its 5-year average. This raises the question of whether the stock’s performance is sustainable or if it’s becoming overvalued. Although Palantir’s growth over the last year has been impressive, at 25%, it still falls short of its 5-year average. Looking ahead, analysts are forecasting 22% growth over the next year, which is still significantly higher than the sector average of 5.5%, but still below the company’s historical growth rate. This could signal that growth may be slowing down.

The same conclusion holds when we look at their projected earnings per share (EPS), which are expected to grow by 28% over the next 3 to 5 years. While this is above the sector average of 15%, it’s still a significant drop from their 5-year average growth rate of 47%. On a more positive note, the company’s profitability is strong. Their gross margin stands at 81%, which is higher than both the sector and their 5-year average. The bottom line shows an 18% margin, well above the sector’s 3.7%. Over the last five years, the company has been turning around from a loss, which is an impressive turnaround. They’ve also generated a substantial amount of cash from operations—$1 billion over the past 12 months, compared to the sector’s $94 million and their own 5-year average of $272 million.

Palantir’s performance has been impressive, with a 372% increase in stock price. However, past performance is no guarantee of future results. It’s also important to highlight that the company’s revenue grew by 30% from the latest quarter compared to the previous one. Beyond revenue, operating income is also on the rise, and margins are improving, which points to the company’s strong operational efficiency and overall quality.

Free Cash Flow

Looking ahead, Palantir is expecting $1 billion in free cash flow for the full year, with revenue projections between $2.8 billion and $2.81 billion. For the upcoming quarter, analysts are anticipating revenue in the range of $767 million to $771 million. A key factor in their growth has been the ongoing success in closing major deals, with 36 contracts worth at least $5 million each, and 16 worth $10 million or more. Additionally, two of the largest defense companies are collaborating on Pentagon bids, which could capture a substantial portion of the $850 billion U.S. defense budget, a figure that could rise under the Trump administration.

Insider Selling

However, it all boils down to valuation. Insider ownership sits just under 13%, but significant insider selling has occurred—$2.5 billion worth over the past year. In Q4 2025 alone, $36 million in shares were sold, with $1.41 billion in total sales in the previous quarter. While we don’t necessarily view this as a bearish signal (since insiders sell for personal and financial reasons), it’s worth noting. A notable sale occurred on January 2nd by Ryan Taylor, totaling $37 million. Transparency is key here for those evaluating the stock in their own thesis.

Institutional investors are largely bullish, owning 46% of the company. While they’ve sold $1.88 billion worth of shares over the past year, they’ve also bought back significantly more—$5.54 billion. But as always, just because institutions are buying doesn’t mean it’s the right move for every investor. Always conduct your own due diligence.

Looking at the underlying metrics, free cash flow is moving in the right direction, though it has been negative historically. Sales growth is strong, but the question remains: Is revenue growth beginning to slow down? It peaked at 47% in 2020, but dropped to 17% in 2023. And while sales growth is positive, it’s worth noting that shareholder dilution has been a concern over the past few years.

If Palantir can continue to outperform the S&P, this might not be a concern. Their return on invested capital (ROIC) has shown that, for the most part, they’ve been operating at a loss over the last few years. However, it’s encouraging to see profitability in the most recent year, and 2024 is expected to follow suit with another year of bottom-line profits based on the trailing 12 months. Their operating margin also shows signs of improving efficiency. From being significantly negative in 2020, it has improved year after year, now sitting at 14% on a trailing 12-month basis. Free cash flow has been solid since 2021, currently at 40% for the trailing 12 months, which is impressive considering we typically look for at least 5%. Additionally, their net debt is zero, both in 2020 and anticipated for the next 12 months, suggesting that Palantir could pay off its entire debt in no time, with plenty of cash on hand.

Valuation

Now, our intrinsic valuation for Palantir comes to $59 today, based on our discounted cash flow (DCF) model. For the full year of 2024, we’ve used the $1 billion in free cash flow the company projected in their investor presentation. The growth forecast is somewhat mixed, with some years showing positive growth and others negative. For the forward-looking period, we’ve assumed 35% growth with a discount rate, resulting in an intrinsic value of $59. This suggests a downside of 25% at the current price, though these numbers are subjective. You can check out this model by clicking the pinned comment below and run your own numbers, whether for Palantir or any other stock. Full transparency: at a 30% growth rate, the intrinsic value comes to about $45 (a 43% downside), while at a 40% growth rate, it’s around $77 (roughly the current price).

What this indicates is that, with the current price of $79, investors are essentially expecting 40% year-on-year growth in free cash flow. If you believe growth will be lower—say 35%, 30%, or 25%—then Palantir may be overvalued at this point. But if you think growth will exceed 40%, it could be undervalued. If it’s around 40%, then the stock appears fairly priced. We generally take a more conservative approach, applying a 35% growth rate with a margin of safety. For us, this would make Palantir a buy at $53, but considering its current price is above our intrinsic value, it’s trading at a notable premium. For those interested, the stock would be a buy at $53 with a 10% margin of safety, $47 at 20%, and $45 at 25%.

Interestingly, Wall Street analysts forecast the stock will hit an average price of $49 over the next year, which suggests a downside of around 38% from its current price.

Conclusion

As always, we’d love to hear your thoughts in the comments below. Maybe you’re holding onto the stock as it heads into earnings, considering buying if the price drops, or perhaps it doesn’t align with your overall portfolio. We also want to mention that, based on the current market cap and price, for those who view Palantir as a potential $1 trillion company within the next 5 to 10 years, the share price could reach around $439. Just an interesting exercise for those thinking long-term.

Disclaimer: I want to make it clear that I am not a financial advisor, and nothing I say is intended to be a recommendation to buy or sell any financial instrument. Additionally, it's important to remember that there are no guarantees or certainties in trading or investing, and you should never invest money that you can't afford to lose.

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