Palantir: Let's Talk About The Elephant In The Room (Valuation)
Summary
- The "elephant in the room" with Palantir Technologies is a FWD P/E above 200 and a market cap of 100X+ sales, reflecting expectations of accelerated growth. Is the market correct?
- Palantir’s unique position in the AI application layer, proven scalability, and alignment with Western values drive its potential to become a $1 trillion company, justifying its high valuation.
- Using Microsoft as a benchmark, Palantir needs $90B in revenue, $68B in gross profit, $23B in FCF, and a 40.3% revenue CAGR to be a $1 trillion company.
- Palantir’s Q1 2025 revenue growth of 39% aligns with the required 40.3% CAGR, with U.S. commercial revenue growth (71% y-o-y), suggesting potential to accelerate to 70% by 2026.
- Volatility is to be expected, and AI skeptics should avoid PLTR stock. But I rate once again PLTR stock a Strong Buy and reiterate my $250 5-years price target.
Analyst’s Disclosure:I/we have a beneficial long position in the shares of PLTR either through stock ownership, options, or other derivatives. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.
As of July 2025 I have a position of roughly 1,100 shares in Palantir. I plan to keep holding them for the foreseeable future.
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