Palantir stock price is nearing a bear market after crashing by over 17% from its highest level this year. PLTR was trading at $157 on Tuesday, bringing its market capitalization to over $372 billion. So, is it safe to buy the dip or sell the rip?
Palantir’s business is thriving
Palantir stock price has jumped from a low of $6 in 2023 to the current $157, transforming its market capitalization from $16 billion to $372 billion.
The company has benefited from the ongoing strength of its business as it expands to the corporate side. Most importantly, it has become one of the top players in the artificial intelligence (AI) space.
The most recent results showed that Palantir’s revenue rose by 48% from the same period last year. Its revenue crossed the important milestone of $1 billion, a trend that will continue.
Palantir’s US revenue jumped by 68% to $733 million, led by the commercial segment whose revenue jumped to $306 million. The US government, its biggest client, made $426 million.
The company’s innovation has led it to diversify its business and move from being a mere government contractor to a diversified business.
Companies are embracing Palantir’s Gotham product despite its high cost because it helps them to replace other data analytics products. Gotham enables companies to integrate, analyze, and operationalize data.
One way Gotham works is that it creates a digital twin of a company that helps them to run simulations and automate processes.
The Artificial Intelligence Platform (AIP) is another top part of its product since it enables companies to plan and create large language models easily.
Read more: Palantir stock dubbed the future ‘operating system for AI’: find out more
Is Palantir cheap or overvalued?
While most people believe that Palantir is a good investment, the main issue in the investment community is its valuation, especially now that its market capitalization has jumped close to $400 billion.
For a company valued at over $400 billion, you would expect its revenue and profits to be substantial or growing at a breakneck speed.
In Palantir’s case, its revenue for the year is expected to come in at $4.16 billion, a 45% YoY growth. It will then grow by 34% next year to $5.6 billion.
This means that the company has a price-to-sales multiple of 115, which is much higher than most companies. The multiple means that it would take 115 years to recoup the investment all factors constant.
Palantir stock has a forward price-to-earnings (P/E) ratio of 181, also much higher than most companies. Therefore, from these multiples, the PLTR stock is highly overvalued.
Many analysts value software companies using the rule-of-40 multiple that compares its revenue growth and profit margins. In its case, the revenue growth is 48%, while its net income margin is 33%, giving it a multiple of 81%, making it quite cheap.
Palantir stock price technical analysis
The daily timeframe chart shows that the PLTR stock price has pulled back from $189.65 to $157 after Nvidia warned that its business was slowing. Still, the stock remains highly bullish as it is above all moving averages.
Palantir has also settled at $150, an important level that is long the strong pivot reverse level of the Murrey Math Lines.
It has also formed a morning star candle. Therefore, the most likely scenario is where it rebounds and hits the year-to-date high of $189. A move above that level will point to more gains to the extreme overshoot point at $250, up by 60% from the current level.
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