Considering an Investment in Palantir Shares Prior to Feb. 3?
Palantir's 2024 Success and 2025 Uncertainties
Palantir Technologies (PLTR) was a standout AI stock in 2024, skyrocketing by 340%. Despite maintaining relatively stable levels in 2025, investors are still intrigued by the possibility of another outstanding year like 2024, as Nvidia (NASDAQ: NVDA) demonstrated with its own multiyear rise.
February 3 marks the release of Palantir's fourth-quarter earnings, which will shed light on the business's current state and plans for 2025. This event could potentially send the stock soaring or provide reasons for a sell-off.
Palantir's U.S. Breakthrough in 2024
Palantir's success is directly linked to its AI platform. The tech company has been providing real-time decision-making software for a long time, originally targeted at government use. However, it also saw significant success in the commercial sector. Currently, government revenue still represents the largest segment, making up 56% of revenue.
The most recent growth wave Palantir experienced is primarily due to its Artificial Intelligence Platform (AIP) product. Palantir considers AIP to be the next phase of AI implementation. AIP provides users with tools to integrate AI models directly into a business's core operations and sets up AI agents to handle tasks typically performed by humans.
The U.S. commercial sector experienced the most significant AIP adoption in 2024, resulting in a 54% surge in Q3 revenue. Management anticipates AIP's success will spread to government divisions and international markets, further boosting revenue growth.
Overall, revenue increased by 30% year-over-year to $726 million, with Q4 revenue projections between $767 million and $771 million, signaling a growth rate of 27%. While growth is projected to slow quarter-over-quarter, Palantir's management has a history of surpassing projections.
However, Q4 results may take a backseat to 2025 projections, leaving questions about the future.
Balancing Stock Price and Growth Expectations
While management has not yet disclosed 2025 forecasts, analysts predict moderate revenue growth of only around 25%. If Palantir's stock continues to trade at such high multiples, it may struggle to support the current valuation.
Palantir's stock is currently one of the most expensive in the market, with a trailing earnings multiple of 365 and forward earnings multiple of 127. This high valuation is causing concern among analysts, as only a few companies have sustained such elevated multiples.
Analysts argue that a growth rate of 35% year-over-year for five consecutive years, while maintaining a 20% profit margin, might be overly optimistic. At this point, five years of growth would be priced into the stock, posing a challenge for future returns.
Unless Palantir's management releases an unexpectedly strong revenue growth projection for 2025, the stock might be overvalued, making it a potential sell opportunity for some investors before February 3.
After analyzing Palantir's financial performance, some investors are weighing whether the company's high valuation is justified, considering the predicted moderate 2025 revenue growth of around 25%. Given Palantir's current expensive stock price, with a trailing earnings multiple of 365 and a forward earnings multiple of 127, investors might be looking for strong 2025 projections to maintain its current value, or they may consider it a potential sell opportunity before the release of Q4 earnings on February 3.
Investors are closely watching Palantir's 2025 financial plans, as they aim to balance their investment in the company with their expectations of future growth. If Palantir's management can deliver an unexpectedly strong revenue growth projection for 2025, it could potentially justify the current high valuation and sustain investors' interest. On the other hand, should the growth expectations be less than expected, some investors might consider it an opportunity to sell their shares before the earnings release.