PLTR Stock: Buy Or Sell Palantir At $160?

Core Insights - Palantir Technologies stock has seen a minor sell-off of approximately 16% over the past three weeks, despite being more than double its value year-to-date, driven by interest in generative AI and new government contracts following Donald Trump's re-election [2] Financial Performance - Palantir reported a robust Q2 with revenue increasing by 48% year-over-year, surpassing $1 billion, and raised its full-year revenue forecast to between $4.14 billion and $4.15 billion from a previous estimate of $3.89 billion to $3.90 billion [3] - Adjusted operating margins improved to 48%, compared to 37% in the same quarter last year [3] Market Dynamics - The Federal Reserve's potential interest rate cuts may benefit AI software stocks like Palantir, but small-cap stocks have rallied instead, indicating a shift in market sentiment [4] - Sam Altman, CEO of OpenAI, suggested that the AI market may be in a bubble, drawing parallels to the dot-com bubble, which could impact investor sentiment towards AI stocks [5] Government Contracts and Growth Risks - Palantir's U.S. government sector revenue grew by 53% year-over-year to $426 million, but reliance on government contracts poses risks due to their irregular nature [6] - The company's long-term growth depends on its commercial market, which may face challenges in scaling its Foundry platform to small and medium-sized enterprises [7] Valuation Concerns - Palantir's revenues have grown at an average annual rate of 24% over the past three years, significantly outpacing the S&P 500's growth of 5.2%, yet the stock is trading at high multiples of approximately 90x FY'25 revenue and 245x FY'25 earnings, indicating limited margin for error [8]