The stock has ripped 2,500% higher in just three years.
If you traveled back in time to early 2023, few would probably have guessed that Palantir Technologies (PLTR 0.62%) would trade at $165 per share. The stock traded under $7 back then. But the artificial intelligence (AI) boom took off, Palantir released its AIP platform for AI software in mid-2023, and the business and the stock have both soared ever since.
Investors face the same question now: where will Palantir’s stock go from here following its 2,500% rally over nearly three years? Here is why I predict Palantir Technologies will trade below $120 per share in 2027.
Image source: Getty Images.
Breathtaking business performance
It’s no secret that AI is all the craze right now. But while companies duke it out over data centers and AI chips, Palantir Technologies has dominated in AI software. The company builds specialized software applications for government and corporate customers.
The software digests vast amounts of data and then analyzes it for various purposes. For instance, Palantir has helped optimize supply chains, detect crime and fraud, and aid military missions, and that’s just scratching the surface. Palantir’s upside lies in its flexibility, making it applicable to virtually any group or company that can afford it.
Palantir’s growth blasted off and has continued to accelerate since it released its AIP platform for AI applications in mid-2023. It’s been a genuine game-changer.
PLTR Revenue (TTM) data by YCharts
The business has now done $3.9 billion in revenue over the past four quarters. Revenue growth accelerated to nearly 63% year over year in the third quarter. It’s hard to find companies growing that fast on such a large dollar figure. It gets better; Palantir is already highly profitable with a 28% net profit margin.
Remarkably, Palantir still only has 911 total customers. There are many thousands of large organizations worldwide that could benefit from AI software, which is why Palantir has Wall Street so excited.
Outdone only by its own stock
Perhaps the only thing to top Palantir’s business success is its own stock. As impressively as Palantir has performed, the stock’s 2,500% gains over the past three years have been life-changing for investors who got in early enough.
Unfortunately, those monstrous returns have also sent the stock’s valuation into the stratosphere. Shares currently trade at a price-to-sales (P/S) ratio of 108 and a price-to-earnings (P/E) ratio of 385.
To put it in perspective, the business would take (assuming no growth) over a century to pay back your investment with its revenue. You would have to wait nearly 400 years to recoup your investment from Palantir’s profits!
Make no mistake about it, Palantir’s stock has reached valuations that could have very profound consequences if all that market euphoria and enthusiasm fades even a little.
Today’s Change
(-0.62%) $-0.96
Current Price
$154.78
Key Data Points
Market Cap
$369B
Day’s Range
$147.57 – $158.11
52wk Range
$63.40 – $207.52
Volume
2.4M
Avg Vol
59M
Gross Margin
80.81%
Dividend Yield
N/A
Finding some rationality after a generational run
At the moment, Wall Street analysts see Palantir finishing 2025 at $4.4 billion in revenue, then growing by 41% next year to $6.2 billion. But analysts have repeatedly raised their estimates throughout this year as the company tops expectations each quarter. Therefore, I’ll assume that trend continues and bump next year’s estimated 41% growth to 50%, lifting revenue to $6.6 billion.
Now, the million-dollar question is what valuation will Palantir trade at? The stock trades at $165 per share, with a $392 billion market cap at about 108 times revenue. Stocks rarely sustain P/S ratios of 40 to 50, let alone 100 or more. Even Nvidia, the face of the AI boom, has seldom traded at more than 40 times its revenue over the past several years.
A broader market downturn or a slowdown in Palantir’s growth would likely be quite painful for the stock at these levels. The stock trading down to a P/S ratio of 60 would wipe out virtually all of the upside from Palantir’s revenue growing to $6.6 billion next year. Below, you can see how severe the potential downside is at lower valuations:
| Price-to-Sales Ratio | Resulting Market Cap | Potential Upside/Downside |
|---|---|---|
| 60 | $396 billion | +1% |
| 50 | $330 billion | -16% |
| 40 | $264 billion | -32% |
| 30 | $198 billion | -49% |
Source: The author created the table using the calculations described above.
At a P/S ratio of 40, the share price would fall to approximately $112. Again, it’s hard to sustain such high valuations. Palantir has been an anomaly to this point, but it’s still far more likely that this is the exception and not the rule. It shouldn’t be a shock if Palantir’s share price is lower in early 2027 than it is today.
