Palantir Technologies (PLTR)
Software / IA
Elite AI software: revenue +68% (accelerating to +85% in Q1'26), Rule of 40 = 145, adjusted operating margin ~50%, net cash ~$8bn. But at $174 it trades at ~62× sales and ~195× owner earnings: even a bull scenario (revenue to ~$28bn) yields a ~0% return over five years. Verdict: Overvalued — an exceptional business, an unsustainable price; watch below ~$49.
- Price
- $174.26
- Intrinsic value (5y, base)
- $79
- Total annual return (5y)
- -14.7%
- Status (nominal)
- Overvalued
- Margin of safety
- No margin
The essentials
- Exceptional business: revenue +68% TTM accelerating to +85% (Q1'26; US commercial +133%), RDV +105% to $11.2bn, Rule of 40 = 145, adjusted operating margin ~50%, net cash ~$8bn and zero debt.
- Two accounting traps: FCF (~$2.7bn) adds back SBC ($730M, 14% of revenue), and net income uses a tax rate of ~1.3% (NOL release) → real normalized owner earnings are ~$1.6bn.
- At $174 (~62× TTM sales, ~195× owner earnings), it is valued beyond perfection: the reverse DCF shows the market must believe a scenario better than the bull case just to avoid losing value over five years.
Intrinsic value — two valuation methods
By both methods, the value today (DCF $52 · Multiples $63) is below the market price ($174).
Pillars of the analysis
The verdict — today vs 5 years
Today — expensive, no margin of safety: at $174 trades ~174.9% above its value discounted to today (~$63); the expected return does not even reach the risk-free rate (4.5%).
At 5 years — Sobrevalorado: the expected total return is negative — the price already discounts a demanding scenario that, if not met, results in a loss.
The bridge: the return at 5 years falls below the risk-free rate (4.5%) — which is why there is not even a discount to today's value. To require a 15% annual return, it would need to be bought at ~$39.
Thesis
The business
Palantir is one of the highest-quality software businesses in the market: revenue growing +68% (accelerating to +85% in the first quarter of 2026), a Rule of 40 of 145 (a level comparable only to Nvidia), an adjusted operating margin of ~50%, capital-light, and a balance-sheet strength of ~$8,000 million in net cash with zero debt. The engine is US commercial (+133% year over year) driven by AIP, on top of a base of more than a decade of government entrenchment. As a business, it is exceptional.
The valuation
Here is the problem. Palantir is valued on a single multiple over its owner earnings (an integrated business). And real owner earnings are far lower than the headline figures: FCF (~$2.7bn) adds back SBC ($730M) and the GAAP result uses a tax rate of ~1.3% (an NOL release, unsustainable) → normalizing the tax and expensing SBC, owner earnings run around ~$1.6bn.
At $174, with ~$8bn of net cash, the stock trades at 62× TTM sales and 266× owner earnings — the most expensive software name in the market, 3 to 6 times more expensive than its high-growth comparables (CrowdStrike ~20-30×, Snowflake ~14-21×, ServiceNow ~6-8× EV/sales).
The margin of safety (inverted: what you have to believe)
No margin of safety: the price already discounts a demanding scenario. The reverse DCF makes it explicit: to earn just 10% a year over five years from $174, Palantir would need to take its owner earnings from ~$1.6bn to ~$17bn — revenue of ~$43-47bn (≈8-9× the current level, a sustained +53% a year for five years) at a ~40-45% margin — and have the multiple 'only' compress to ~30× (still a premium). It's a bar the bull scenario itself doesn't clear: the bull (revenue to ~$28bn, +40% annually, owner earnings ~$10bn, exit at 32×) yields barely ~0% over five years, because the multiple collapses from ~195× to ~32×.
In the base scenario (gradual deceleration, margin ~40%, exit ~29×), the five-year value is ~$79 — below the current price — a CAGR of -15%. To earn 10% on entry it would need to be bought near ~$49; for 15%, near ~$39 (the zone that short-seller Michael Burry argues for).
What to watch
The risk isn't the business, it's the price. What could resolve the overvaluation is time (revenue growing into the multiple over years) or a correction (which has already happened in part: it trades well below its all-time high of ~$207 (Nov-2025)). Watch: the sustainability of US commercial and RDV growth (if it decelerates, the multiple collapses), the lumpiness of government revenue (cancelable contracts, budget cycles), SBC dilution (with the buyback program ended in Jan-2026), and Karp's key-man risk. This is a business to keep on watch and buy much lower, not at this price.
Educational / informational. Does not constitute investment advice.