Wall Street Analyst Asserts Palantir Is Undervalued — A Closer Look

Key Points

• Palantir is a classic battleground stock, and concerns about valuation are prompting a price decline.

• Multiple valuation approaches exist, and some investors may be misjudging the company.

• Palantir’s rapid growth supports a premium valuation, yet some analysts still view the stock as undervalued.

Artificial intelligence is poised to transform the technology landscape in ways that are still emerging. Advanced algorithms automate tasks, analyze vast datasets, and even generate code, driving unprecedented efficiency across industries. However, consensus on optimal AI deployment, especially for investors seeking strong returns, remains elusive.

Investor sentiment is split. Some worry that rising valuations of AI-focused stocks could limit future gains, while others argue that exceptional growth justifies premium pricing.

Palantir Technologies (NASDAQ: PLTR) exemplifies this debate. The company provides AI‑driven platforms that unify siloed data, enabling organizations to derive actionable insights and optimize operations.

Image source: Getty Images.

Context is key

The common perception that Palantir is overvalued is understandable given its high price‑to‑earnings multiple. The S&P 500 trades at a multiple of roughly 32, whereas Palantir’s P/E exceeds 130. However, the P/E ratio reflects past earnings and may not capture the value of a rapidly accelerating growth trajectory.

In the latest quarter, revenue surged 85% year‑over‑year to $1.63 billion, marking the fastest growth to date and the eleventh consecutive quarter of accelerating revenue. Operating margin expanded to 46%, pushing earnings per share up 325% to $0.34 from $0.08 a year earlier. These trends suggest that traditional valuation metrics may understate the company’s worth.

What Wall Street is saying

During its recent AIPCon conference, Palantir showcased real‑world case studies demonstrating how its ontology framework maps AI systems to fragmented data and physical operations, enabling decision‑making matrices, supply‑chain automation, and manufacturing optimization.

UBS analyst Karl Keirstead attended the event, engaging with customers and executives. He argues that simplistic valuation models overlook the depth of Palantir’s technology. According to Keirstead, “the complexity and depth of its systems have no real competition.” He notes that customers reported that “no large language model can replace Palantir for data workloads,” and that AIP’s deep integration provides a “five‑year moat.”

Keirstead values the stock at 46 times its 2027 projected free cash flow, concluding that “Palantir shares are undervalued relative to medium‑term growth prospects.”

Is he right?

I believe the analyst’s assessment is spot‑on. Palantir has raised its full‑year outlook, projecting revenue of $7.66 billion — a 131% increase year‑over‑year — and adjusted operating income of $2.25 billion, up 97%. The company also anticipates free cash flow of $4.3 billion at the midpoint of its guidance, representing an 89% rise.

For high‑growth firms, the price‑earnings‑to‑growth (PEG) ratio is a useful gauge. Palantir’s PEG stands at 0.46, well below 1, indicating that the stock may be undervalued relative to its expected earnings growth.

If the analyst’s thesis holds — and I think it does — Palantir enjoys a unique competitive advantage, and concerns about its premium valuation are unfounded. That said, the stock may not suit every investor’s risk tolerance.

Personally, I consider Palantir a buy.

Should you buy stock in Palantir Technologies right now?

Before committing, consider the following: The Motley Fool’s Stock Advisor team recently identified what they view as the ten best stocks for investors to purchase today. Palantir did not make that list.

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