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Palantir Technologies (PLTR-3.24%) is the top-performing stock in the S&P 500 to start 2025, soaring 50% so far this year. But the software company’s bright earnings prospects won’t be enough to protect investors from short-term pain as its share price eventually returns to more normal levels, some analysts say.
The stock, which dipped about 3.5% to close at $112.62 per share on Tuesday, has still surged about 35% since the company reported better-than-expected fourth-quarter earnings earlier this month. And it’s up a whopping 350% over the last 12 months. That’s taken Palantir’s price-to-earnings ratio to almost 600, and about 200 based on projected 12-month earnings. The overall current PE for the Nasdaq is about 42.
“The stock’s not made of teflon,” said Bob Lang, founder and chief options analyst at Explosive Options. Palantir is trading at about 150% of the 200-day moving average, which Lang called an “extraordinary” level that can’t last forever.
“Eventually the rally will peter out as investors get exhausted,” Lang said.
The company, which builds software for big data analytics companies, earlier this month reported revenue of $828 million for the fourth quarter — a 36% jump year over year. Revenue from the U.S. government grew 45%. Palantir’s projections for sales and profit in 2025 both topped analysts’ estimates.
Palantir may trigger a selloff if it opts to sell new shares to take advantage of its current, much higher market valuation, Lang said. The could quickly test the $84-$87 level. However, even at $90 per share, there would still be an uptrend.
Lang remains optimistic about the company’s earnings prospects. He said analysts’ estimates of 25% growth in 2026 are far too low as Palantir secures new work, especially from governments.
Michael Rechenthin, head of R&D at tastylive, a streaming platform geared toward options traders, shared both Lang’s optimism about Palantir’s potential work for the Trump administration — and his caution about the stock’s immediate prospects.
“Revenues and net income have been increasing quarter after quarter — but not by the rate at which is stock is growing,” Rechenthin said. He said he won’t be adding to his position at this level.
In August, Palantir and Microsoft (MSFT-0.20%) announced that they were deepening their partnership to provide secure cloud, AI, and analytics capabilities to U.S. defense and intelligence agencies. Through the partnership, agencies will have access to Microsoft’s Azure cloud compute and large language models, or LLMs, including OpenAI’s GPT-4, through its Azure OpenAI Service that will be integrated with Palantir’s AI Platforms (AIP). Palantir’s products will be deployed in Microsoft’s Azure cloud for government, including clouds for top secret use.
—Britney Nguyen and Vinamrata Chaturvedi contributed to this article.