Palantir’s history of blowouts faces highest multiple on Wall Street

While there is broad uncertainty about the outlook for government and military spending under Trump, Palantir, lead by chief executive Alex Karp, is expected to benefit from any reallocation in budgets. Photo by Kevin Dietsch/Getty Images/Postmedia files

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At a time when other artificial intelligence companies and momentum-stock favourites have stalled amid tariff-related uncertainty, Palantir has built on the 340 per cent surge it saw last year. The stock is not only the top-performing stock since President Donald Trump’s tariffs were announced a little more than a month ago, it is also the biggest gainer on the S&P 500 Index this year, up 65 per cent, and just a tad below its February record. Shares rose 0.2 per cent on Monday.

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The company’s software is used in a number of military and government applications, and analysts have been growing more positive on its prospects, according to data compiled by Bloomberg. The consensus for its adjusted 2025 earnings has risen almost 15 per cent over the past quarter, while the view for revenue is up more than six per cent over the same period.

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However, the rise in these estimates hasn’t kept pace with the stock, resulting in a valuation that is by all accounts swollen. Shares trade at more than 200 times estimated earnings, making it the priciest in the Nasdaq 100 Index by this metric. It also trades at more than 70 times estimated sales, second only to Bitcoin proxy Strategy Inc.

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“The multiple has always been the hard part of the story, and there’s a real danger in owning an expensive stock if fundamentals start to slow because all the hot money that flowed into it can flow out just as fast,” said Kevin Landis, chief investment officer at Firsthand Capital Management. “I’ve been trimming my position, but reluctantly, because I end up regretting it. It says something if the only bad thing you can say about a stock is the valuation; it’s like the inverse of a value trap.”

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Massive Rallies

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The company has a history of blowing past expectations, leading to massive stock rallies. Its past two reports sparked gains of more than 20 per cent, and seven of the past nine reports resulted in double-digit advances. The options market is expecting another hefty swing this quarter, implying a one-day move of nearly 13 per cent. Now, though, if the stock’s rally is to continue, another blowout is likely necessary.

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Palantir has “to absolutely annihilate the top line,” said Ted Mortonson, managing director at Robert W Baird & Co. “You have to justify the valuation out three years now and they have no choice not to blow out the revenue number.”

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There are reasons to think the company will continue to excel. While there is broad uncertainty about the outlook for government and military spending under Trump, Palantir is expected to benefit from any reallocation in budgets. NATO acquired an AI-powered military system from the company last month, and its intelligence-gathering truck just received high marks from the United States Army. The upcoming results are expected to show revenue growth of 36 per cent while adjusted earnings rise more than 60 per cent.