Palantir Technologies (PLTR) Stock: Can This AI Giant Justify Its Sky-High Valuation?

TLDR:

Palantir hit new record highs for second consecutive day, closing around $130 Q1 revenue grew 39% year-over-year to $884 million, fastest growth since 2021 Stock trades at P/E ratio of 512, raising valuation concerns despite strong business Technical analysis projects potential upside target of $210 by June U.S.-China tariff reduction agreement boosted investor appetite for AI stocks

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Palantir Technologies shares closed at another record high on Wednesday, marking the second consecutive day of all-time peaks as the stock continues its impressive 2025 rally.

The AI analytics company’s stock has surged more than 71% year-to-date despite recent earnings that failed to wow investors with spectacular results.

Last week, Palantir reported first-quarter earnings for 2025 that showed continued strong growth. Quarterly sales reached a new record of $884 million, representing a 39% year-over-year increase – the fastest growth rate the company has seen since 2021.

CEO Alex Karp described the business as being “in the middle of a tectonic shift in the adoption of our software.”

However, while the company beat Wall Street revenue expectations of $863 million, its adjusted earnings per share of $0.13 merely met expectations.

The stock fell after the earnings announcement, mainly because market expectations had risen extremely high.

Palantir Technologies Inc. (PLTR)

Valuation Concerns

The primary issue facing Palantir isn’t its business performance but rather its valuation.

The stock currently trades at a price-to-earnings ratio of 512, which some analysts have described as “gargantuan.” This eye-popping valuation has led some to label it a meme stock, despite its growth and consistent profitability.

Palantir’s P/E ratio has remained at or above 200 since October 2024. This means investors have routinely paid a massive premium for the business.

While Palantir’s business fundamentals aren’t considered risky, the danger comes from its valuation.

When the company didn’t deliver blowout earnings numbers as it has in previous quarters, some investors became hesitant, particularly given the troubling start to the market year and concerns about potential tariffs and recession.

Technical Analysis Shows Bullish Signs

Despite valuation concerns, technical analysis of Palantir’s stock shows bullish momentum.

The shares consolidated within a pennant pattern before breaking out in Tuesday’s trading session, indicating a continuation of the stock’s longer-term uptrend.

The stock has nearly doubled from last month’s low amid a rebound in AI-related investments.

A technical forecast using bars pattern analysis projects an upside target of around $210, with this move potentially playing out until early to mid-June.

Major support levels to watch during any retracements include $97, which sits just above the 50-day moving average, and $66, near the 200-day moving average.

The relative strength index points to bullish momentum with readings above the indicator’s neutral threshold but below overbought levels, suggesting room for further buying.

Palantir’s latest surge comes after the U.S. and China agreed Monday to slash their tariffs on one another for 90 days, cooling global trade tensions and restoring risk appetite for AI stocks.

Bank of America analysts recently called Palantir a “market definer” for companies seeking to leverage artificial intelligence.

Expectations remain high that the firm’s software could benefit from ongoing efforts to improve government efficiency, further fueling investor enthusiasm.

The stock has weathered recent market volatility well, bouncing back from a 6% drop last week when earnings failed to meet investors’ sky-high expectations.

With its record-breaking performance continuing, Palantir remains one of the most watched stocks in the AI sector despite its controversial valuation.

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