S&P is down 6% in April. Palantir (NASDAQ:PLTR) is up 11%? That’s not bullish. That’s bizarre, considering the numbers you see when you lift the curtain. Tariffs are hammering tech, semiconductors are shaking, growth stocks are bleeding, and Palantir – a stock trading at PE multiple of 700 is rising? Either we’re witnessing brilliance or a bubble inflating before our eyes.
And bubbles pop. When they do, you don’t want to be left holding nothing. This is why investing in a single stock, no matter how lucrative, can be very risky. We diversify away that risk while being exposed to upside in our High-Quality portfolio, which has outperformed the S&P 500 and achieved returns greater than 91% since inception.
Let’s break Palantir down.
Why Is Palantir So Hot Right Now?
It’s not fundamentals driving this. It’s euphoria supercharged by three powerful story lines:
[1]
AI Buzz = Investor Sugar High
Palantir calls itself an “AI company” now. That label alone triggers algos and retail fear-of-missing-out.
- Its Gotham and Foundry platforms do integrate machine learning.
- But it’s still fundamentally a data consultancy business for the government and large enterprises.
- This isn’t Nvidia. And it’s definitely not Google.
Still, AI hype alone can send any ticker vertical. Just ask C3.ai – that reached highs of $180+ before falling to a mere $10.
[2] Insane Momentum: The Stock is Up Almost 700% in 3 Years
Palantir has returned 686% in the past 3 years. That’s the kind of move that breaks valuation anchors. People stop asking “what’s it worth?” and start asking “how high can it go?”
- 3M return: +22%
- 6M return: +116%
- 12M return: +348%
- 3Y return: +686%
[3] Retail Crowd Favorite
Palantir is a retail darling – with a CEO (Alex Karp) who talks like a philosopher and a cult-like following that sees it as the next Palantir-for-planet-earth operating system.
But sentiment isn’t a moat. And it isn’t a reason to buy.
The Red Flags Are Staring At You
Palantir bulls love to talk about potential. But here’s what the data actually says:
- PE Multiple: A massive 450x !
- Revenue Growth: Great at 29% in the last 12 months, but Nvidia’s is way higher at 114% and that’s actually a company that is powering the AI revolution. Despite this, Nvidia’s PE is at 33x.
- Margins: Sure, improving fast but there is a limit. Net margin is already at 16%, even if it were to rise to 30%, it still does not justify the outrageous multiple. And remember this, Nvidia is already at 55%+ margin and commands less than 1/10th the multiple vs PLTR
- Market Cap: $212 billion, richer than many cash generating S&P giants
There are times to ride such momentum, but in the case of Palantir, that time is gone. Valuation multiples mean something. Evaluating multiples in the context of growth and margin expansion is one of the factors we consider in Trefis High Quality (HQ) Portfolio which, with a collection of 30 stocks, has a track record of comfortably outperforming the S&P 500 over the last 4-year period. Why is that? As a group, HQ Portfolio stocks provided better returns with less risk versus the benchmark index; less of a roller-coaster ride as evident in HQ Portfolio performance metrics.
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