TLDR
- Palantir reported 39% year-over-year growth in Q1 2025, the fastest since 2021
- Revenue reached $884 million, slightly beating Wall Street expectations of $863 million
- Despite strong performance, stock fell after earnings release
- Shares trade at an extremely high P/E ratio of 512
- Stock hit record highs recently but dropped 2.4% in premarket trading on May 15
Palantir Technologies delivered another quarter of impressive growth, but investors seem hesitant about its sky-high valuation. The company reported record quarterly sales of $884 million in Q1 2025, representing 39% year-over-year growth – its fastest pace since 2021.
CEO Alex Karp described the situation as “a tectonic shift in the adoption of our software.” The company barely beat Wall Street revenue expectations of $863 million.
The data analytics firm’s adjusted earnings per share came in at $0.13, meeting analyst expectations but not exceeding them. This lack of an earnings beat may have contributed to the stock’s decline following the announcement.
What’s puzzling many market watchers is why Palantir’s stock isn’t soaring after such strong results. The answer may lie in its valuation.
Valuation Concerns
Palantir currently trades at a P/E ratio of 512, which is extraordinarily high even for a growth stock. The company’s market cap hovers around $280 billion, which values it higher than many more established businesses.
The stock has routinely traded at a P/E ratio above 200 since October 2024. While growth stocks often command premium valuations, Palantir’s price relative to its earnings stands out as exceptional.
Year-to-date, Palantir shares have surged more than 71%. However, recent trading suggests investors may be reconsidering this rapid appreciation.
Some analysts have even labeled Palantir a “meme stock” despite its consistent profitability and strong growth trajectory. This characterization speaks to concerns about disconnection between the company’s stock price and its fundamentals.
Earlier this year, Palantir experienced a stock price dip as investors worried about potential tariffs and recession possibilities. Although these concerns have somewhat eased, the episode may have created lingering caution.
The market’s expectations for Palantir have risen dramatically. When the company delivers merely good results rather than spectacular ones, investors seem disappointed.
Recent Price Movements
On May 15, 2025, Palantir stock slipped 2.4% to $127 in premarket trading. This drop came after the stock hit its second record high of the week on Wednesday.
The current trading price of approximately $130.12 represents a 1.58% daily gain. However, this follows several days of decline after the earnings release.
Palantir has been one of the S&P 500’s top performers over the past year, with an astonishing 501% increase. This performance has pushed it to trade at 232 times future earnings.
The stock is approaching the high end of Wall Street’s target range. Analyst price targets currently span from $40 to $140, suggesting limited upside potential at current levels.
Market trends have played a role in Palantir’s recent performance. The artificial intelligence rally that boosted many tech stocks has helped propel Palantir shares upward.
The White House’s pullback on tariffs also reignited enthusiasm for growth stocks, creating a favorable environment for Palantir. However, this rally may be running out of steam.
Some investors might use this opportunity to lock in profits unless there are additional positive catalysts. The Trump administration’s continued AI deals could potentially provide such support.
Palantir’s Q1 2025 results continue to show a company experiencing robust growth. However, investors appear to be weighing this performance against the stock’s stretched valuation.
The company’s latest quarterly sales of $884 million marked another record and demonstrated accelerating growth. This acceleration is particularly impressive given the company’s size.
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