Palantir Stock's Valuation: Overstretched or Rightfully Earned?

Palantir Technologies PLTR has emerged as one of the most talked-about names in the S&P 500, and not just for what it does, but for what investors are willing to pay for it. With a market capitalization of $420 billion, it now surpasses giants like Coca-Cola and Bank of America. Yet, when viewed through a valuation lens, Palantir stands alone in its league.

Its trailing 12-month price-to-earnings ratio exceeds 580X, and its forward 12-month multiple hovers above 225X. Even more striking is its enterprise value relative to forward 12-month revenues of more than 82X, a level rarely seen, even during the most exuberant periods in market history. By that metric, Palantir looks far more expensive than nearly every other established U.S. stock over the past two decades.

Such elevated valuations raise the bar for future performance. For a company trading at these levels, expectations around revenue acceleration, margin expansion and long-term scalability must not only be met, but also exceeded. Even minor disappointments can trigger sharp corrections as multiples revert toward historical norms. Companies in the past that reached these kinds of revenue multiples — often 30x or higher — eventually faced tough questions about sustainability. Optimism alone is rarely sufficient when fundamentals lag.

That said, Palantir’s expanding government and commercial contracts, its robust and evolving AI platforms, and consistent execution lend credibility to its premium valuation. While risks remain, we view Palantir as one of the most compelling long-term AI plays available today.

PLTR’s Price Performance, Estimates

The stock has surged a whopping 130% year to date, significantly outperforming the industry’s 23% rally.

The Zacks Consensus Estimate for PLTR’s earnings has increased 21.4% over the past 30 days.

PLTR stock currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Stable Defense Alternatives to Palantir

As PLTR’s valuation moves higher, Lockheed Martin LMT and RTX Corporation RTX offer more grounded defense exposure.

Lockheed Martin, with its massive defense contracts, provides steady cash flow and less volatility than PLTR. Its trailing 12-month price-to-earnings ratio is below 25X, and its forward 12-month multiple is just above 16X. Lockheed Martin continues to benefit from global rearmament while trading at modest earnings multiples.

Similarly, RTX shines through missile systems. RTX’s defense backlog, like LMT's, underscores its stability. Its trailing 12-month price-to-earnings ratio is below 34X and its forward 12-month multiple is just above 24X.

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This article originally published on Zacks Investment Research (zacks.com).

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