Palantir’s valuation appears detached from reality when compared to the rest of the S&P 500
While the overall stock market this week is treading water on President Donald Trump ‘s tariff back-and-forth, Palantir is showing animal spirits are alive and well on Wall Street by trading at a valuation that appears detached from fundamental reality. Shares of the mysterious government contractor and artificial intelligence play are trading at a 62 forward price-to-sales ratio, the highest of any company in the S & P 500 — and it’s not even close. The next closest nonfinancial stock in terms of forward price-to-sales is Texas Pacific Land Corp. at 32 times estimates for sales over the next year, according to FactSet data. Take a look at the other top 10 nonfinancial S & P 500 stocks by forward price-to-sales ratio: Calling all value investors (chortle): Nvidia trades at a relatively tame 15 forward price-to-sales ratio. Palantir’s eye-popping valuation comes after a 24% jump in its shares on Tuesday, as the company reported a 36% increase in sales for the last quarter and raised its sales forecast for the full year. Strong results for sure, but it appears that Palantir is trading in another stratosphere in terms of valuation, as retail traders have found their new favorite toy. It attained this new status through a 340% jump last year to lead the S & P 500. For the analysts not willing to abandon math at this stage, Palantir’s stock price is not sustainable, even if it does become a primary contractor for a U.S. government currently looking to modernize and grow more efficient under the tutelage of Elon Musk . PLTR ALL mountain Palantir since IPO “Fundamentals remain robust, but PLTR would have to accel growth to 50% for 4 years and trade at 13.5x CY28E rev just to hold its stock price,” wrote Jefferies software analyst Brent Thill in a note after the earnings. Thill’s price target is $28 a share. Palantir is currently trading for $100 a share. Even on a relative basis to its respective industry, Palantir’s valuation is unusual. We searched the S & P 500 for the stocks with the largest forward price-to-sales ratio relative to the industry average. Palantir doesn’t top this list but it’s near the top. Another stock many think is detached from reality as well is on this list: Tesla . The retail investor is betting Tesla and Palantir are the future of the American economy as robotics, artificial intelligence and Trump policies take hold. One day, the companies’ bottom lines will need to justify these valuations or this rally will be looked at as a time of misplaced retail trader enthusiasm typical of late-inning bull markets.
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