Imagine a world where data is the ultimate currency, and those who can harness it hold the key to success. In this realm, Palantir Technologies is a powerhouse, with shares soaring 130% over the last 12 months. But, as with any hot stock, investors are left wondering: is Palantir a multibagger waiting to happen, or a bubble waiting to burst?
## Uncovering Palantir’s Edge
At its core, Palantir’s role is to sift through unstructured data to uncover actionable insights. This type of data mining is distinct from the generative AI behind large language models (LLMs), but the two technologies complement each other perfectly. Generative AI can allow operators to interact with data analytics software using simple text-based prompts, eliminating the need for complex workflows and extensive training. AI can also speed up the data mining process, providing real-time insights in fast-paced scenarios.
This synergy has significant implications, particularly in the military and public sectors. Palantir’s software-as-a-service (SaaS) tools are being touted as game-changers in the battlefield, with applications in targeting enemy assets, mine removal, and other critical technologies. The company’s recent release of its official Artificial Intelligence Platform (AIP) has piqued the interest of investors and analysts alike.
## Business is Booming
Palantir’s third-quarter earnings were a resounding success, with revenue surging 63% year-over-year to $1.18 billion. The U.S. commercial business saw an astonishing 121% growth, with sales reaching $397 million – roughly 33% of the total. This surge in revenue is largely driven by private sector contracts, which have become the company’s core growth driver.
While Palantir’s brand image is often associated with its work in the intel services and government sectors, private sector contracts offer a unique set of benefits. For one, the private sector is significantly larger and more in need of data analytics services. Additionally, these new clients help diversify Palantir away from political risk, which could become a challenge due to the company’s involvement in international conflicts and its close ties to the Trump administration.
## A Valuation to Match
Palantir’s price-to-earnings (P/E) multiple of 170 is a reflection of its high valuation. Investors who buy the stock now are essentially betting that the company’s long-term growth is just getting started. However, in the near term, it might make more sense to wait until Palantir’s valuation drops a little before considering a position in the stock.
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If you’re considering investing in Palantir Technologies, it’s essential to weigh the pros and cons. While the company has shown impressive growth and has a unique edge in the data analytics space, its high valuation and potential risks should not be ignored. The Motley Fool’s Stock Advisor analyst team has a proven track record of identifying top-performing stocks, and their latest list is available for individual investors.
Will Ebiefung has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Microsoft, Palantir Technologies, and Snowflake. 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.
