PLTR's Valuation is High: Not a Red Flag, if Execution Stays

Palantir Technologies’ PLTR near 120% gain over the past year reflects growing confidence in the company’s long-term positioning rather than short-term speculation.

While valuation is undeniably elevated, it is better viewed as a sign of market conviction in Palantir’s execution, expanding use cases, and durable customer relationships. Its trailing 12-month price-to-earnings ratio exceeds 495 times, and its forward 12-month multiple hovers above 158 times.

Importantly, Palantir is no longer valued purely on promise. The company has demonstrated improving operating leverage, rising commercial adoption and a clearer path to scaling beyond its traditional government roots. These shifts help justify a premium, especially in a market that increasingly rewards software platforms with embedded AI capabilities.

Valuation risk, in this case, is less about overextension and more about pacing. Palantir does not need explosive growth to support its current multiple; it needs consistency. As long as contract wins, customer expansion and platform stickiness remain intact, the valuation can be absorbed over time through fundamentals rather than price correction.

Moreover, premium valuations often persist longer for companies that own mission-critical workflows. Palantir’s software is deeply integrated into decision-making processes, creating switching costs that support long-term revenue durability. That stability reduces the likelihood of sharp multiple compression.

In essence, valuation sets a high bar, but it also reflects Palantir’s transition into a more mature, credible software leader rather than a speculative growth story.

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 and forward 12-month price-to-earnings ratios are just above 19X. 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 just above 31 times, and its forward 12-month multiple is above 28 times.

PLTR stock currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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

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