Palantir Stock Has Been Getting Slammed. Time to Buy?

Core Viewpoint - Palantir Technologies has experienced significant volatility in its stock price, with a notable increase in value over the past year, but recent declines raise questions about its high valuation and future growth potential [2][8]. Financial Performance - In Q2, Palantir achieved a 48% year-over-year revenue growth, surpassing $1 billion, with U.S. commercial revenue increasing by 93% to approximately $306 million [5]. - The company raised its full-year revenue guidance to about 45% year-over-year growth and forecasted a 50% revenue growth for Q3 [5]. - Palantir reported a GAAP net income of $327 million for the quarter and recorded its highest total contract value ever at $2.3 billion, up 140% year-over-year [6]. Valuation Concerns - Despite strong financial results, Palantir's stock is considered overvalued, trading at 127 times sales and 580 times earnings, with a forward price-to-earnings multiple of 278 [9]. - The S&P 500 has a price-to-earnings multiple of 25 and a forward multiple of 24, highlighting the disparity in valuation [9]. Market Risks - The company faces risks related to its government contracts, which can be inconsistent, and increasing competition in the enterprise AI sector [10]. - If growth normalizes from current elevated levels, the stock's high valuation could decline significantly [10]. Investment Strategy - While Palantir's business execution has been strong, the stock's rapid price increase may not align with its fundamentals, suggesting a need for a deeper sell-off to mitigate valuation risks [11]. - The company is recommended for watchlisting rather than immediate investment, as the current stock price may not present a favorable entry point [12].