Palantir (NASDAQ: PLTR) has been one of the market’s top performers since the AI investment trend began in 2023. If you purchased $10,000 worth of its shares at the start of 2023 and held on, that stake would now be worth nearly $223,000. However, as of the close on Friday, the stock had also declined by 31% from the high it set in November. The question is, is this decline a healthy correction or a sign of things to come?
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Palantir’s association with AI harkens back to its initial software, which used AI to process data quickly and provide decision-makers with insights on what they should do next. This software originally was designed for use by intelligence agencies and the military, but eventually, the company expanded into the commercial side of things. Over the years, Palantir has adopted and integrated generative AI into its products, and its platforms have become some of the most common tools that governments and companies alike are using to harness the power of AI.
This has led to unbelievable sales growth. In Q4, Palantir’s revenue increased 70% year over year to $1.4 billion. Wall Street is bullish on its outlook too, projecting 62% growth in 2026 and 43% growth in 2027. It’s an incredible business that’s growing rapidly, but there’s one issue: All of that expected growth is already priced into Palantir’s stock.
Right now, Palantir trades for nearly 250 times trailing earnings and 117 times forward earnings. That’s an issue, and it begs the question: How much will a company like Palantir be worth when it’s fully mature? While some software stocks are struggling now, in the past, it was not uncommon to see some trading at 50 times earnings, which was still an expensive valuation. For Palantir to be trading at 50 times earnings, it would have to grow its bottom line by 489% while its stock price went sideways.
So, while Palantir’s revenue growth outlook over the next few years may sound impressive, it will need to do all that and more just to justify its current stock price. Where will Palantir’s stock be by 2030? Well, if its revenue grows by 62% next year, 43% in 2027, and 40% for the three years after that, that would be 536% growth. Assuming that its earnings growth parallels its revenue growth, that would bring it to a level nearly equal to what it would require for the stock to trade at about 50 times earnings.
