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SUMMARY
Parkev Tatevosian, CFA, analyzes Palantir's recent stock performance and valuation, noting a significant drop to near 52-week lows after a period of overvaluation. He argues that, given Palantir's strong revenue growth, improving profit margins, and a now more reasonable valuation, the stock presents a compelling opportunity for long-term investors.
MAIN POINTS
- Palantir stock has dropped to near its 52-week low after previously being considered overvalued.
- The company has demonstrated impressive revenue growth from $600 million in 2018 to $4.5 billion in 2025, along with significant improvements in profit margins.
- Palantir's revenue growth rate accelerated sharply in 2024 and 2025, with forecasts suggesting even higher growth in 2026.
- Analysts expect Palantir's revenue growth acceleration to peak in 2026, followed by a deceleration in subsequent years, contributing to recent stock price declines.
- Palantir's valuation has become more reasonable, with forward price-to-earnings and cash flow ratios dropping significantly from previous highs.
- Based on updated discounted cash flow analysis, Palantir is now considered undervalued and a strong buy for long-term investors.
DETAILED ANALYSIS
Palantir Technologies has experienced a sharp decline in its stock price, now trading near its 52-week low after a period of significant overvaluation. The company's valuation had previously soared, with forward price-to-earnings and cash flow ratios reaching extreme levels, sometimes exceeding 200. This overvaluation persisted even as Palantir reported strong quarterly results, as much of the optimistic growth outlook was already reflected in the share price.
Despite this, Palantir has achieved remarkable business performance, growing its revenue from $600 million in 2018 to $4.5 billion in 2025. Notably, the company has managed to accelerate revenue growth in recent years, with rates jumping from 16.7% in 2023 to 56% in 2025, and forecasts for 72.5% growth in 2026. Alongside top-line growth, Palantir has significantly improved its profitability, with operating profit margins rising to 31.6% in 2025 and cash flow from operations to sales reaching 47.7%.
These improvements have been achieved without substantial increases in costs, particularly as the company has scaled its forward deployed engineering teams efficiently. However, Wall Street analysts anticipate that 2026 will mark the peak of Palantir's revenue growth acceleration, with a projected slowdown to 44.7% in 2027 and 43% in 2028. This expected deceleration has contributed to investor caution and the recent pullback in the stock price.
With the correction, Palantir's valuation metrics have normalized, now standing at a forward price-to-earnings of 83 and a forward price-to-operating cash flow of 66. Updated discounted cash flow analysis suggests an intrinsic value of $153 per share, compared to the current market price of $128, indicating the stock is undervalued. Given the company's strong business fundamentals, improved profitability, and more attractive valuation, the current environment is seen as a favorable entry point for long-term investors.
LINKS
- YouTube channel membership for early access, spreadsheets, and VIP Discord.
- Special offer for The Motley Fool Stock Advisor.
- Parkev Tatevosian's book on a 6-step investing framework.
- Fiscal.ai investment research platform with a viewer discount.
- Webull sign-up link for bonus shares.
- Substack newsletter subscription for monthly updates.