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Palantir's Current Valuation: Stretched or Fully Justified?
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Key Takeaways
PLTR trades at over 225X forward earnings and more than 78X its forecasted revenues.
High multiples demand not just strong growth but sustained overperformance to avoid compression.
LMT and RTX offer lower volatility and steadier defense exposure at far more modest valuations.
Palantir Technologies (PLTR - Free Report) has emerged as one of the most talked-about names in the S&P 500, and not just for what it does, but for what investors are willing to pay for it. With a market capitalization of $358 billion, it now surpasses giants like Coca-Cola and Bank of America. Yet, when viewed through a valuation lens, Palantir stands alone in its league.
Its trailing 12-month price-to-earnings ratio exceeds 640X, and its forward 12-month multiple hovers above 225X. Even more striking is its enterprise value relative to forward 12-month revenue of more than 78X, a level rarely seen, even during the most exuberant periods in market history. By that metric, Palantir looks far more expensive than nearly every other established U.S. stock over the past two decades.
Image Source: Zacks Investment Research
Such elevated valuations raise the bar for future performance. For a company trading at these levels, expectations around revenue acceleration, margin expansion, and long-term scalability must not only be met; they must be exceeded. Even minor disappointments can trigger sharp corrections as multiples revert toward historical norms. Companies in the past that reached these kinds of revenue multiples — often 30x or higher — eventually faced tough questions about sustainability. Investor optimism alone is rarely enough to sustain prices when fundamentals don’t keep up.
The pattern is hard to ignore. When companies reach 30x sales or more, they often enter what is viewed as the “bubble zone,” a place where expectations are sky-high and hard to maintain. Revenue growth typically slows, forecasts get downgraded and valuations eventually compress. In the short term, momentum can mask this risk, but over time, gravity tends to take hold.
In conclusion, Palantir’s valuation not only defies market norms but also places it well beyond even the exuberance seen in past bubbles. Unless its performance can defy history, the risk of multiple compression looms large. Investors should tread carefully.
Stable Defense Alternatives to Palantir
As PLTR’s valuation moves higher, Lockheed Martin (LMT - Free Report) and RTX Corporation (RTX - Free Report) offer more grounded defense exposure. Lockheed Martin, with its massive defense contracts, provides steady cash flow and less volatility than PLTR. Its trailing 12-month price-to-earnings ratio is below 18X, and its forward 12-month multiple is just above 14X. Lockheed Martin continues to benefit from global rearmament while trading at modest earnings multiples.
Similarly, RTX shines through missile systems. RTX’s defense backlog, like LMT's, underscores its stability. Its trailing 12-month price-to-earnings ratio is below 44X, and its forward 12-month multiple is just above 23X.
PLTR’s Price Performance, Estimates
The stock has surged a whopping 97% year to date, significantly outperforming the industry’s 19% rally.
Image Source: Zacks Investment Research
The Zacks Consensus Estimate for PLTR’s earnings has remained unchanged over the past 30 days.
Image Source: Zacks Investment Research
PLTR stock currently carries a Zacks Rank #5 (Strong Sell).
Image: Bigstock
Palantir's Current Valuation: Stretched or Fully Justified?
Key Takeaways
Palantir Technologies (PLTR - Free Report) has emerged as one of the most talked-about names in the S&P 500, and not just for what it does, but for what investors are willing to pay for it. With a market capitalization of $358 billion, it now surpasses giants like Coca-Cola and Bank of America. Yet, when viewed through a valuation lens, Palantir stands alone in its league.
Its trailing 12-month price-to-earnings ratio exceeds 640X, and its forward 12-month multiple hovers above 225X. Even more striking is its enterprise value relative to forward 12-month revenue of more than 78X, a level rarely seen, even during the most exuberant periods in market history. By that metric, Palantir looks far more expensive than nearly every other established U.S. stock over the past two decades.
Such elevated valuations raise the bar for future performance. For a company trading at these levels, expectations around revenue acceleration, margin expansion, and long-term scalability must not only be met; they must be exceeded. Even minor disappointments can trigger sharp corrections as multiples revert toward historical norms. Companies in the past that reached these kinds of revenue multiples — often 30x or higher — eventually faced tough questions about sustainability. Investor optimism alone is rarely enough to sustain prices when fundamentals don’t keep up.
The pattern is hard to ignore. When companies reach 30x sales or more, they often enter what is viewed as the “bubble zone,” a place where expectations are sky-high and hard to maintain. Revenue growth typically slows, forecasts get downgraded and valuations eventually compress. In the short term, momentum can mask this risk, but over time, gravity tends to take hold.
In conclusion, Palantir’s valuation not only defies market norms but also places it well beyond even the exuberance seen in past bubbles. Unless its performance can defy history, the risk of multiple compression looms large. Investors should tread carefully.
Stable Defense Alternatives to Palantir
As PLTR’s valuation moves higher, Lockheed Martin (LMT - Free Report) and RTX Corporation (RTX - Free Report) offer more grounded defense exposure. Lockheed Martin, with its massive defense contracts, provides steady cash flow and less volatility than PLTR. Its trailing 12-month price-to-earnings ratio is below 18X, and its forward 12-month multiple is just above 14X. Lockheed Martin continues to benefit from global rearmament while trading at modest earnings multiples.
Similarly, RTX shines through missile systems. RTX’s defense backlog, like LMT's, underscores its stability. Its trailing 12-month price-to-earnings ratio is below 44X, and its forward 12-month multiple is just above 23X.
PLTR’s Price Performance, Estimates
The stock has surged a whopping 97% year to date, significantly outperforming the industry’s 19% rally.
Image Source: Zacks Investment Research
The Zacks Consensus Estimate for PLTR’s earnings has remained unchanged over the past 30 days.
PLTR stock currently carries a Zacks Rank #5 (Strong Sell).
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.