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Up 29% in 3 Months, Should You Buy Palantir Right Now?

Core Viewpoint - Palantir Technologies is at a critical juncture as it approaches its Q3 earnings report, with concerns about its high valuation and potential impacts from the federal government shutdown [1][9]. Company Overview - Palantir is a unique data-mining company that leverages artificial intelligence to analyze information from diverse sources, providing insights for military and intelligence agencies [2][3]. - The company has a long-standing relationship with the U.S. government, notably contributing to intelligence efforts that led to the killing of Osama bin Laden [4]. Product and Growth - In 2022, Palantir launched its Artificial Intelligence Platform (AIP), enabling clients to utilize large language models for data interaction and operational guidance [5]. - The company employs "boot camps" to demonstrate its platform's capabilities, resulting in significant deal closures: 157 deals over $1 million, 66 over $5 million, and 42 over $10 million in Q2 [6]. Financial Performance - In Q2, Palantir generated $306 million from its U.S. commercial segment, a 93% increase year-over-year, while U.S. government revenue rose 53% to $426 million [6]. - Expectations for Q3 revenue are set at $1.08 billion, reflecting a 50% year-over-year increase but only an 8% sequential increase, which may not be sufficient to maintain stock momentum [9][10]. Valuation Concerns - Palantir's current valuations are extremely high, with a price-to-earnings ratio of 623 and a forward P/E of 217, indicating that the stock is driven more by momentum and expectations than by current fundamentals [8]. - A report from Citron Research criticized Palantir's valuation as "detached from fundamentals," suggesting a price target of $40 per share, approximately 73% lower than its current price [12]. Future Outlook - The upcoming Q3 earnings report is crucial for Palantir to either meet or exceed high growth expectations to sustain its stock performance [7][13]. - Management's guidance for full-year revenue is between $4.142 billion and $4.150 billion, representing a 44% increase from 2024, but it remains uncertain if this will satisfy institutional investors' expectations [10].