Should You Consider Buying Palantir Technologies Stock Before February 3?

Palantir Technologies (PLTR) emerged as one of the standout stocks in 2024, witnessing an impressive rise of 340%. For instance, a $15,000 investment at the beginning of the year would have grown to over $66,000 by year's end. This remarkable performance can be attributed to several factors, primarily the strong revenue growth the company has generated.

Palantir has utilized artificial intelligence (AI) within its data analytics platform, providing innovative solutions for both government and commercial clients. This capability enables users to automate processes and improve decision-making. CEO Alex Karp has forecasted further growth, attracting investors eager to buy shares. As Palantir prepares to release its next earnings report on February 3, the question arises: Should investors buy the stock beforehand?

Will Palantir's Revenue Growth Continue to Accelerate?

Palantir's Artificial Intelligence Platform (AIP) has been a significant driver for its business success. The company has been conducting "boot camps" to demonstrate the platform's value, leading to increased sales fueled by strong demand for AI solutions. Recently, Palantir has seen its already robust revenue growth rate accelerate.

In its last earnings report in November, Karp highlighted the company’s performance, stating that demand was "unrelenting" and that Palantir had "absolutely eviscerated this quarter," achieving a year-over-year revenue growth of 30%.

However, with Karp's enthusiastic predictions, expectations will be high for the upcoming earnings results on February 3. Yet, even if Palantir meets or exceeds those expectations, it may not cause a significant surge in stock prices.

Is the Stock's Slow Start to 2025 a Harbinger of Future Trends?

As of now, shares of Palantir have declined by just over 5% at the start of the new year. Although this decline is not drastic, it might signal a cooling of the initial excitement surrounding the stock.

One of the main concerns regarding Palantir is its valuation. While the company’s earnings have been on the rise, it still maintains a high price tag—trading at about 150 times next year's expected earnings. Looking at the price/earnings-to-growth (PEG) ratio, Palantir’s is above 3, indicating that, by traditional standards, it is relatively expensive. Typically, a PEG ratio below 1 suggests a favorable buying opportunity, placing Palantir far from that mark.

For short-term investors, even if Palantir experiences continued growth, this may not be enough to drive a stock rally due to the hefty premium already factored into the company’s valuation. Unless Palantir significantly surpasses earnings expectations and provides optimistic guidance for the year, there exists a possibility that the stock could depreciate temporarily.

Reasons to Consider Holding Off on Purchasing Palantir Stock

Given its current valuation, Palantir may have more downside potential than upside. The company’s upcoming earnings report could provide valuable insights on two critical fronts: the sustainability of its growth and whether market sentiment around its valuation is shifting.

If Palantir delivers strong quarterly results without a corresponding increase in stock price, it could indicate a growing caution among investors regarding its lofty valuation. In light of its high valuation and inherent risks, Palantir might not be the best option for investors at this time, despite its intriguing potential.

David Jagielski holds no positions in any of the stocks mentioned here. Various investment firms may hold positions in Palantir Technologies.

Palantir, Stock, Earnings