New
Should You Buy Palantir Technologies Stock Before Feb. 3?
Palantir Technologies (NASDAQ: PLTR) was one of the hottest stocks of 2024, rising by a staggering 340%. A $15,000 investment in the data analytics stock at the start of the year would have been worth more than $66,000 by the end of it.
A big reason for Palantir stock's impressive performance is the exciting revenue growth the business has been generating. Using artificial intelligence (AI), its data analytics platform has unlocked new ways for government and commercial customers to automate their processes and enhance their decision-making.
Where to invest $1,000 right now? Our analyst team just revealed what they believe are the 10 best stocks to buy right now. See the 10 stocks »
With CEO Alex Karp seeing a lot more growth coming in the future, investors have been eager to buy up shares of the business. Palantir reports its next round of earnings numbers on Feb. 3. Should investors buy the stock before that happens?
Will Palantir's revenue growth zoom higher?
Palantir's Artificial Intelligence Platform (AIP) has proven to be a huge catalyst for the business. The company has been showing potential customers -- through what it calls boot camps -- the value that its platform can have for businesses, and sales have been taking off as a result of strong AI-related demand. In fact, Palantir's already high level of revenue growth has been accelerating in recent quarters.
PLTR Operating Revenue (Quarterly YoY Growth) data by YCharts
When the company last reported earnings in November, Karp said that demand was "unrelenting" and that the company "absolutely eviscerated this quarter," with revenue growing at a rate of 30% year over year.
Karp has been hyping up the business, and that means expectations will be high for Palantir when it releases its results on Feb. 3. But even if it can deliver, that may not be enough to send the stock soaring.
Is the stock's slow start to 2025 a sign of things to come?
Shares of Palantir are down just over 5% to start the new year as I write this. That's not a huge sell-off by any means, but it could be a sign that perhaps the feverish excitement around the stock is starting to wane.
The biggest problem for the AI stock is undoubtedly its valuation. Although Palantir's earnings have been growing, the stock is still incredibly expensive and is trading at around 150 times next year's expected profits. Even if you take a longer-term view, its price/earnings-to-growth (PEG) multiple is more than 3. Typically, a growth stock is viewed as a cheap buy if its PEG ratio is below 1, and Palantir is nowhere near that.
The caution for those looking at the short term is that even if Palantir's growth rate has accelerated yet again, that may not be enough to trigger a big rally for the stock. That's because at such a high premium, a lot of growth is already priced into its valuation. Unless Palantir massively beats earnings expectations and provides glowing guidance for the rest of the year, there's the possibility that it's stock could still fall in value in the short term.
Why investors may want to hold off on buying Palantir's stock
At its current valuation, Palantir's stock looks to have a lot more downside risk than possible upside.
Palantir's upcoming earnings numbers may help tell investors two important things. The first is whether Palantir's growth is truly unrelenting and still going higher. The second is whether the market is starting to cool off and if Palantir's valuation is becoming more of a concern for investors. If the company delivers a strong quarter and the stock doesn't rally, it could be further confirmation that there's some growing hesitancy around the stock's high price.
This is one of the riskier stocks to own this year due to its enormous valuation and while it may be an intriguing one to follow, there are many better-priced growth stocks out there to buy today.
Should you invest $1,000 in Palantir Technologies right now?
Before you buy stock in Palantir Technologies, consider this:
The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Palantir Technologies wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.
Consider when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $874,051!*
Stock Advisor provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month. The Stock Advisor service has more than quadrupled the return of S&P 500 since 2002*.
*Stock Advisor returns as of January 21, 2025
David Jagielski has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Palantir Technologies. The Motley Fool has a disclosure policy.
