Here's Why I'm Avoiding Palantir Technologies Stock

Core Viewpoint - Palantir Technologies has experienced significant stock price appreciation, but concerns about its valuation and future growth sustainability are emerging [1][6][11] Group 1: Revenue Growth - Palantir's revenue growth is accelerating, with management expecting a 36% increase in the first quarter, although this may be an underestimation [4][3] - The company has successfully expanded its AI-powered data analytics software from government to commercial sectors, contributing to steady revenue growth since 2024 [3][4] Group 2: Stock Valuation - The stock price has risen nearly 400% over the past year, raising concerns about its valuation relative to its revenue growth rate [6][8] - Palantir's price-to-sales (P/S) ratio is currently at 77 times sales, which is significantly higher than the typical range for software companies (10 to 20 times sales) [8][10] - For the stock to be justified at its current valuation, Palantir would need to achieve extraordinary growth rates, which it is not currently delivering [9][11] Group 3: Future Growth Expectations - To normalize its valuation, Palantir would need to sustain a revenue growth rate of around 40% over the next five years, which is above its current growth trajectory [10] - The current stock price reflects high expectations for future growth, making it challenging for the company to meet market expectations without substantial revenue increases [11]