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Globe and Mail
3 days ago
- Business
- Globe and Mail
Palantir Stock Is Booming, but Here's 1 Major Reason I Wouldn't Touch It Right Now
Key Points Palantir's Artificial Intelligence Platform (AIP) has transformed its U.S. commercial business. The company is on track to more than triple its adjusted operating income to $1.9 billion in just two years. 10 stocks we like better than Palantir Technologies › There have been plenty of companies that have benefited from the artificial intelligence (AI) boom over the past few years, but you could argue Palantir (NASDAQ: PLTR) has been the torchbearer of AI stocks. Even as Nvidia has shocked investors by growing to become the most valuable company in the world, I'm sure many would be surprised to know that Palantir has more than doubled Nvidia's returns since the beginning of 2023. Palantir, which builds data and analytics tools for government and corporate clients, has delivered quarter after quarter of growing revenue and profits. The results speak for themselves. However, there is one major red flag that has me steering clear of the company right now. It's well worth paying close attention to this risk before you buy the stock. Data by YCharts. Where Palantir's financials stand Palantir's Artificial Intelligence Platform (AIP) has been a major reason for its recent financial success. AIP is a platform that allows organizations to run generative AI and large language models (LLMs) within their own operations, and it's been a hit for Palantir's commercial business. In the second quarter (Q2), Palantir's U.S. revenue increased 68% year over year to $733 million, with U.S. commercial revenue being the fastest-growing segment, increasing 93% year over year to $306 million. Palantir's commercial segment still trails behind its U.S. government segment, which grew 53% to $426 million last quarter, but it's catching up with hundreds of new deals. In Q2, the company achieved its highest-ever quarter of U.S commercial total contract value of $843 million, up 222% year over year. Arguably more impressive, however, is the growth in Palantir's operating income, which reached $269 million last quarter. Just two years ago, in Q1 2023, the company achieved its first quarter of operating profits with $4.1 million. Data by YCharts. On the top line, Palantir achieved its first $1 billion quarter in Q2 and has seemingly locked in consistent profitability. That's an incredible amount of financial progress in such a short period of time. Here's why I would avoid Palantir stock right now The biggest issue I have with Palantir is its absurdly high valuation. As of Aug. 6, the stock is trading at close to 274 times forward earnings. To put that into perspective, the current forward price-to-earnings (P/E) ratio of the S&P 500 is around 26, and the P/E ratio of the S&P 500 tech sector is just above 38. Even Nvidia, which is growing earnings at a faster pace than Palantir, is trading at 41 times forward earnings, and that's already expensive by most standards. Data by YCharts. If the company's rapid revenue growth has you focused on the top line, Palantir's price-to-sales (P/S) ratio is similarly problematic. Trading at 132 times sales, the stock is 47 times more expensive than the S&P 500, and it's by far the most expensive company in the index. Even with Palantir's recent success, there's no way to logically justify its valuation. It has become increasingly disconnected from reality, even by tech growth stock standards, which are known for stretched valuations as investors anticipate rapid earnings growth. The high valuation doesn't make Palantir a bad stock to have in your portfolio; it just makes it a bad time to start a position in the stock. Anything less than perfect execution going forward could cause a sharp and sudden sell-off. Investors saw it happen earlier this year with the stock losing nearly a quarter of its value from Feb. 18 to Feb. 25. It's impossible to predict how the stock will perform in the near term, so I won't recommend waiting until the stock pulls back so you can buy on the dip. But I would recommend dollar-cost averaging and gradually acquiring shares if you're a believer in Palantir's long-term potential. This could help hedge your position against any sudden drops in the stock price. 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 Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you'd have $635,544!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you'd have $1,099,758!* Now, it's worth noting Stock Advisor's total average return is 1,046% — a market-crushing outperformance compared to 181% for the S&P 500. Don't miss out on the latest top 10 list, available when you join Stock Advisor. See the 10 stocks » *Stock Advisor returns as of August 4, 2025
Yahoo
5 days ago
- Business
- Yahoo
Wedbush Sees Trillion-Dollar Future for Palantir (PLTR) Amid AI Boom
Palantir Technologies Inc. (NASDAQ:PLTR) is one of the On August 5, Wedbush analyst Dan Ives raised the price target on the stock to $200.00 (from $160.00) while maintaining an Outperform rating. The company raised its full-year 2025 revenue guidance, projecting growth for its US commercial business due to strong adoption of its Artificial Intelligence platform among enterprise and federal customers. Analysts led by Ives particularly cited continued hyper growth demand for Palantir's AI product suite behind the rating affirmation and price target raise. 'We maintain our OUTPERFORM rating on PLTR while raising our price target from $160 to $200 reflecting continued hyper growth demand for the company's AI product suite with the use case era of the AI Revolution now here. This was another eye-popping quarter for the Messi of AI as AIP continues gaining unprecedented interest across the commercial landscape with US Commercial front and center seeing 93% y/y growth with more enterprises looking to PLTR for complex AI use cases.' A financial analyst presenting a chart of insurance solutions to a boardroom. The firm believes Palantir has the potential to be a trillion dollar market cap as the artificial intelligence revolutions gains ground. 'We believe Palantir has a 'golden path to become the next Oracle' over the coming years and will grow into its valuation.' Palantir Technologies Inc. (NASDAQ:PLTR) is a leading provider of artificial intelligence systems. While we acknowledge the potential of PLTR as an investment, we believe certain AI stocks offer greater upside potential and carry less downside risk. If you're looking for an extremely undervalued AI stock that also stands to benefit significantly from Trump-era tariffs and the onshoring trend, see our free report on the best short-term AI stock. READ NEXT: 10 Must-Watch AI Stocks on Wall Street and . Disclosure: None.
Yahoo
28-07-2025
- Business
- Yahoo
Can Palantir Be a Trillion-Dollar Company?
Key Points AI is a huge enabler for Palantir's commercial business expansion. Palantir needs to generate tens of billions of dollars in profits to justify a trillion-dollar market cap. The tech company must execute flawlessly to reach its ambition. 10 stocks we like better than Palantir Technologies › Palantir Technologies (NASDAQ: PLTR) is a polarizing name. For years, critics dismissed it as an overhyped defense contractor disguised as a tech firm. However, the narrative shifted lately. The company is experiencing rapid growth in commercial markets. Its new artificial intelligence (AI) platform is gaining traction and is now profitable. Shares surged 484% in the past year (as of writing), making it one of the largest companies globally, with a $374 billion market capitalization. Investors now face a big question: Could this new phase of Palantir's evolution eventually make it worth $1 trillion? Let's break it down. Where does Palantir stand today? Palantir operates in two primary segments: government and commercial. For most of its history, the company was best known for its work with U.S. defense and intelligence agencies -- a sticky business, but one that didn't scale easily. That's changing. Palantir's Artificial Intelligence Platform (AIP) is emerging as a breakout commercial product. Unlike earlier tools that required significant engineering support from Palantir, AIP is modular, configurable, and deployable in days, not months. Companies can use it to integrate large language models (LLMs) with internal data while maintaining strict governance and security. To accelerate adoption, Palantir launched AIP Bootcamps -- short, high-intensity onboarding programs that enable potential clients to test-drive the platform using their own data. It's a clever growth hack that reduces friction and demonstrates to customers how AI can enhance their operations. Unsurprisingly, commercial revenue has been scaling nicely in recent quarters. In the first quarter, which ended March 31, 2025, U.S. commercial revenue surged 71% year over year, far surpassing groupwide revenue growth of 39%. Even Palantir's "boring" government business is getting an enormous boost thanks to the increase in AI adoption in the public sector, with U.S. government revenue growing 45% year over year in the same quarter. It's early days, but AI is a game-changer for Palantir. How much profit is needed to justify a trillion-dollar market cap? Palantir is currently valued at around $375 billion, so $1 trillion is about 3 times the current market capitalization. Still, to justify that valuation over time, Palantir must back it up with sustainable earnings. Let's assume the market assigns Palantir a generous valuation in the future -- say, a 25 times price-to-earnings (P/E) ratio, similar to other high-quality software companies with durable growth. That would imply the company needs to generate roughly $40 billion in annual net income. Even at a more aggressive 30x multiple, Palantir would still need around $33 billion in net profit. For perspective, Palantir reported an adjusted net income of $334 million in the first quarter of 2025, equivalent to $1.3 billion annualized. To reach $33 billion, net income must grow by over 25 times. For context, that's more profit than Adobe or Salesforce generate in today's market, and they've been building commercial software-as-a-service (SaaS) businesses for decades. In other words, reaching the trillion-dollar mark will require an enormous leap in revenue, margin, and scale, placing Palantir among the largest tech companies, such as Microsoft or Alphabet. What needs to happen from here Palantir might have a long growth runway, but the path to $1 trillion is very challenging. Here's what the company must do next to have a shot at reaching that goal. 1. Scale its commercial business globally The government business is solid but limited. To become a dominant global software company, Palantir must drive widespread commercial adoption of AIP. That means winning Fortune 500 customers, expanding internationally, and proving that AIP is a mission-critical layer of the modern enterprise stack, including building an ecosystem with highly supportive partners. 2. Defend its moat in a competitive AI landscape As enterprise AI heats up, every major cloud and data platform wants a piece of the action. Palantir's differentiation lies in secure deployment, strong data governance, and operational use cases. It must continue to invest in those strengths. Winning in this space means staying ahead not just in tech but also in trust. 3. Expand margins with scale While Palantir is now profitable, its current operating margin remains modest compared to that of top-tier software companies. For perspective, the generally accepted accounting principles (GAAP) net income margin was 16% in 2024. If AIP succeeds in replacing manual customization with out-of-the-box deployment, margins are expected to rise over time due to operating leverage. In other words, net profit must grow even faster than revenue! What does this mean for investors? On one level, Palantir is at a pivotal moment. With AIP gaining traction, commercial growth accelerating, and government demand rising, it has plenty of ingredients for growth. However, to justify a $1 trillion valuation, it must become one of the most profitable software companies on the planet. That means expanding globally, defending its competitive edge in enterprise AI, and scaling margins dramatically. And with its steep valuation, it will be a risky investment for most investors to participate in this ride. 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 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 Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you'd have $636,628!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you'd have $1,063,471!* Now, it's worth noting Stock Advisor's total average return is 1,041% — a market-crushing outperformance compared to 183% for the S&P 500. Don't miss out on the latest top 10 list, available when you join Stock Advisor. See the 10 stocks » *Stock Advisor returns as of July 21, 2025 Lawrence Nga has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Adobe, Alphabet, Microsoft, Palantir Technologies, and Salesforce. The Motley Fool recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy. Can Palantir Be a Trillion-Dollar Company? was originally published by The Motley Fool
Yahoo
24-07-2025
- Business
- Yahoo
Lockmaker Allegion raises 2025 profit forecast on robust demand for security products
-Allegion raised its annual profit and revenue forecast on Thursday, anticipating that strong demand for its high-end locks and electronic systems in non-residential establishments will offset expected tariff impacts. The Dublin-based lockmaker offset weak residential demand, pressured by high mortgage rates and soaring home prices, with price hikes on products sold to commercial businesses. Sales in the company's Americas region rose 6.6% in the quarter, mainly driven by non-residential demand. Its international business recorded a 2.9% rise in revenue. The company expects about $40 million in tariff costs in 2025 and plans to offset the impact on operating profit and earnings per share primarily through pricing actions. Allegion expects its 2025 adjusted profit per share to be between $8.00 and $8.15, compared with its previous forecast of $7.65 and $7.85. It also expects 2025 revenue growth of 3.5% to 4.5% from prior forecast of 1.5% to 3.5%. Allegion reported an adjusted profit per share of $2.04, compared with analysts' estimates of $1.99, according to data compiled by LSEG. Its second-quarter revenue rose 5.8% to $1.02 billion, as compared with Wall Street expectations of $1.02 billion. Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
Globe and Mail
19-07-2025
- Business
- Globe and Mail
Palantir Just Hit a Record High. What's the Smart Move Now?
Key Points The tech company's revenue growth rate accelerated in Q1. Palantir's commercial business in the U.S. is seeing explosive growth. The stock's wild valuation leaves no room for error. 10 stocks we like better than Palantir Technologies › Data and artificial intelligence company Palantir (NASDAQ: PLTR) seemed to defy gravity in 2024. Shares more than quadrupled, rising a staggering 340%. With such an incredible rise, you'd be forgiven for guessing that the stock would cool off in 2025. But, so far, the opposite is true. Shares are heating up, rising by more than 105% year to date as of this writing. This has given the tech stock a gain of approximately 800% since the start of 2024. With shares trading at record highs. What should investors do? Does it make sense to buy more shares and hope the momentum continues? Or should investors take a more cautious approach and hold or even sell the stock? Where to invest $1,000 right now? Our analyst team just revealed what they believe are the 10 best stocks to buy right now. Learn More » Soaring sales One thing Palantir really has going for it is its top-line growth. The tech company posted first-quarter revenue of $884 million, up 39% year over year. Highlighting the company's momentum, this was an acceleration from 36% year-over-year growth in the previous quarter. Fueling Palantir's first quarter of 2025 was 55% year-over-year growth in U.S. revenue. Accounting for $628 million of the quarter's total revenue, the U.S. market is vital for Palantir. Supporting this market was a 71% year-over-year increase in commercial revenue and a 45% jump in government revenue. Zooming out to all of the company's markets, Palantir said in its first-quarter update that it closed 139 deals worth $1 million or greater, 51 deals worth at least $5 million, and 31 deals worth $10 million or more. With these strong results now behind it, management had the confidence to raise full-year revenue guidance. The company said it now expects 2025 revenue to be between $3.890 billion and $3.902 billion. This compares to revenue of about $2.9 billion in 2024. The midpoint of management's 2025 revenue guidance range, therefore, assumes about 36% growth. This impressive top-line growth is bolstering profits. Palantir's first-quarter net income was approximately $214 million, more than double its profit of about $106 million in the year-ago quarter. Comments from Palantir co-founder and CEO Alexander Karp in the company's first-quarter earnings call suggest he believes the company is still in its early innings. "We are in the middle of a tectonic shift in the adoption of our software, particularly in the U.S..." Karp noted. "We are delivering the operating system for the modern enterprise in the era of AI." A valuation problem While Palantir's top-line momentum is certainly impressive, there's one big problem for investors: The market seems to have already priced in more rapid growth for years to come. Today, Palantir's market capitalization sits at about $365 billion -- more than 93 times the high end of management's guidance range for full-year 2025 revenue. Using the company's trailing-12-month sales, Palantir currently has a price-to-sales ratio of 123. This would be a high figure even for a price-to- earnings ratio. And what is Palantir's price-to-earnings ratio? It's 672. Yes, you heard that right. It's safe to say that investors have already bid up the stock to a level that prices in the most optimistic assumptions for this company. So, what should investors do? The decision is a personal one -- one that you'll have to make on your own. However, if I owned the stock, I'd sell. And for those who don't own shares, I'd avoid them like the plague at this price. Of course, I could be wrong. It's always possible that Palantir exceeds even my most bullish assumptions. Still, I believe there are likely better places with less risk and greater upside potential for investors to allocate their capital. Palantir is a great company. But expectations are simply too high. Investors would be wise to wait to see if they can buy shares at a better entry price. 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 Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you'd have $652,133!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you'd have $1,056,790!* Now, it's worth noting Stock Advisor's total average return is 1,048% — a market-crushing outperformance compared to 180% for the S&P 500. Don't miss out on the latest top 10 list, available when you join Stock Advisor. See the 10 stocks » *Stock Advisor returns as of July 15, 2025
