Palantir Technologies experienced a dramatic 28% stock surge on Tuesday following its impressive fourth-quarter earnings announcement and optimistic 2025 guidance that exceeded analyst expectations. The data analytics company, which leverages AI technologies to serve clients including the US government, has seen remarkable growth with shares climbing 35% year-to-date after a staggering 341% gain in 2024.
Despite this extraordinary performance, Wall Street remains notably cautious about Palantir’s prospects. According to Bloomberg data, the stock has garnered just four buy ratings, 15 holds, and five sells from analysts—a surprisingly bearish stance for such a high-performing stock. By comparison, Snowflake, another AI-focused software company with similar valuation metrics, enjoys 36 buy ratings, 10 holds, and only two sells.
The primary concern among skeptical analysts centers on valuation. Brad Zelnick from Deutsche Bank acknowledged Palantir’s “very impressive” earnings but maintained his “Sell” rating, noting that shares trade at approximately 50x projected 2026 revenue—a multiple he considers “nearly impossible to grow into.” Zelnick raised his price target from $35 to $50, still representing 51% potential downside from current levels. He emphasized that Palantir trades at over triple the revenue multiple of the next most expensive stock in his coverage universe.
Jefferies analysts, led by Brent Thill, echoed similar concerns despite praising the company’s strong fundamentals. Their analysis suggests that to justify current stock prices, Palantir would need to accelerate growth to 50% annually for four years and trade at 18x 2028 estimated revenue. Jefferies also questioned Palantir’s sales strategy, noting the company’s “very limited sales force” despite robust growth. The firm reiterated its “Underperform” rating while raising its price target from $28 to $60, indicating 42% potential downside.
Goldman Sachs took a more neutral stance, expressing admiration for Palantir’s differentiated AI technology and strong revenue momentum. The bank anticipates continued benefits from increased efficiency initiatives and technology adoption across the US government. However, Goldman cited the stock’s EV/Sales multiple of 55x as a significant concern, maintaining a “Neutral” rating with an $80 price target representing 22% downside.
Palantir defended its approach during its earnings call, explaining that strong market demand allows the company to drive growth without substantial investment in traditional enterprise sales teams, as customers increasingly seek out their AI-powered solutions proactively.
Key Quotes
At this point, our issue with the stock really boils down to valuation. PLTR’s shares are trading at ~50x an upside CY26 revenue, which history suggests is nearly impossible to grow into, especially at this scale.
Brad Zelnick, research analyst at Deutsche Bank, explained why he maintains a ‘Sell’ rating despite acknowledging Palantir’s impressive earnings. This quote captures the core concern among bearish analysts: that even exceptional AI-driven growth cannot justify the company’s premium valuation multiples.
CY25 rev guide implies 31% growth vs 29% in CY24, and PLTR would need to accel growth to 50% for 4 years and trade at 18x CY28E rev just to hold its stock price.
Brent Thill from Jefferies outlined the mathematical challenge facing Palantir investors. This quote illustrates the extraordinary performance required to maintain current stock prices, highlighting the disconnect between market expectations and realistic growth trajectories for AI companies.
We commend product led-growth but question the reluctance to invest more in an enterprise sales model.
Jefferies analysts raised concerns about Palantir’s unconventional sales strategy, which relies on a limited sales force despite strong growth. This reflects broader questions about whether AI products can truly sell themselves or if traditional enterprise sales investments remain necessary.
Our positive view of Palantir’s differentiated technology is balanced by the stock’s EV/Sales/growth multiple of 1.8x, EV/sales multiple of 55x, and EV/Sales/‘Rule of 40’ of 0.72x.
Goldman Sachs analyst Gabriela Borges articulated the bank’s neutral stance, acknowledging Palantir’s strong AI technology while emphasizing valuation concerns. This quote demonstrates how even analysts impressed by the company’s AI capabilities remain cautious due to pricing metrics.
Our Take
Palantir’s situation represents a fascinating case study in AI market dynamics. The company has successfully demonstrated that AI-powered analytics platforms can achieve extraordinary growth and market penetration, particularly in high-value government and enterprise sectors. However, the persistent analyst skepticism reveals a critical truth: exceptional AI technology alone doesn’t guarantee investment returns when valuations reach stratospheric levels.
What’s particularly noteworthy is the product-led growth model Palantir has achieved. The fact that customers increasingly approach them rather than requiring aggressive sales efforts suggests their AI solutions have reached a level of market recognition and value proposition that few enterprise software companies achieve. This could signal a broader shift in how AI products are sold and adopted.
Yet the valuation debate underscores the speculative nature of current AI investments. When a stock must grow 50% annually for four years just to maintain its price, we’re witnessing market exuberance that may not align with fundamental realities, regardless of how transformative the underlying AI technology proves to be.
Why This Matters
This story highlights a critical tension in the AI investment landscape: the disconnect between exceptional operational performance and extreme valuation concerns. Palantir’s situation exemplifies the broader challenge facing AI companies as investors grapple with how to value rapidly growing technology firms in an AI-driven market.
The skepticism from Wall Street analysts, despite Palantir’s impressive growth metrics, signals potential market correction risks for AI stocks trading at premium valuations. This matters because Palantir is often viewed as a bellwether for enterprise AI adoption, particularly in government and defense sectors. If analysts believe even strong execution cannot justify current valuations, it may indicate broader concerns about AI stock valuations across the sector.
The debate also underscores the transformative impact of AI on business models. Palantir’s ability to grow with minimal sales investment demonstrates how AI-powered products can enable product-led growth strategies that challenge traditional enterprise software economics. This shift has significant implications for how AI companies structure their operations and how investors should evaluate them, potentially reshaping the entire enterprise software industry as AI capabilities become increasingly central to business operations.
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