Palantir Unbound: The Tension Between Fundamentals and FOMO

Palantir’s trailing 12 months price-to-earnings (P/E) ratio of 688.53 stretches the limits of reasonable valuation, implying a perfect growth assumption. Such a valuation means that investors are paying $688 for every $1 of the company’s annual net income. Previously, we explained in detail why Palantir Technologies Inc. (NASDAQ: PLTR) is no ordinary company but the emerging digital nervous system of the U.S. government.

Moreover, Palantir is deeply intertwined with the growing AI-driven ecosystem, which includes Larry Ellison’s Oracle, OpenAI, and Anduril Industries, all of which are closely aligned with Israeli interests. President Trump has routinely demonstrated a willingness to expend his political capital serving those interests. Yet, despite Palantir’s privileged positioning, the company’s valuation still demands faith that government contracts and defense/intelligence-driven AI adoption will translate into exponential, sustained profitability.

Is that leap remotely justified by Palantir’s fundamentals?

Palantir’s Stock Price Moves So Far

When we covered Palantir in early February, describing the company’s business model as providing hegemony technology, PLTR stock was priced at $103.33 per share. At the time, the company’s P/E was also exceptionally high at 172.41, with an average price target of $69.50.

At the present level of $194.50 per share, it is an understatement to say PLTR pricing surpassed all expectations, although proving our consistent framing in the process. With a year-to-date explosive rise of 156%, PLTR stock accrued memetic texture, as such gains are more typical for elusive crypto coins than stocks.

Consequently, this only invited more speculative commitments to Palantir’s exposure, reflecting the classic FOMO market psychology. But does FOMO have a short or long runway?

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Burry’s Back: Palantir’s the Play

Known for his fickle engagement with the public, Dr. Michael Burry of Big Short fame returned to X in late October, following a 2-year hiatus. He made an entry by saying the following as it relates to market bubbles:

“Sometimes, there is something to do about it. Sometimes, the only winning move is not to play.”

Yet, based on Monday’s 13F regulatory filing for his Scion Asset Management firm in Q3, there is something to do about it. Namely, erecting bearish positioning (puts) not only against Palantir but also against Nvidia.

Specifically, the firm now holds 5 million PLTR shares with put options, representing the bulk of the portfolio at 66%. NVDA received the same treatment with 1 million shares, making up 13.51% of the betting commitment.

Interestingly, Burry came to the same conclusion when it comes to pharma giant Pfizer, placing a call option (bullish) for 6 million PFE shares at 11% of the portfolio. In early October, we concluded that all potential fallout related to novel mRNA injections has been voided, having recommended PFE as a solid dividend stock.

Although investors should take note of these bets, it also bears keeping in mind that Scion Asset Management’s one-year performance failed to even outpace the S&P 500 (SPX), at 10.78% vs 19.26% respectively.

Nonetheless, given the aforementioned memetic texture of PLTR stock, Burry’s positioning alone could be sufficient to sway market sentiment.

Palantir’s Revenue Rockets in Q3, but Valuation Remains Astronomical

Looking at Palantir’s latest Q3 earnings release ending September, the company’s growth is still impressive. Year-over-year, its revenue expanded by 63% to $1.181 billion, with U.S.-based revenue growing even more at 77% YoY.

Once again confirming our thesis that Palantir reflects a fusion between corporate and political governance, the company’s commercial contracts brought in 121% more revenue YoY to $397 million, closing in on U.S. government contracts at $486 million, which represents 52% growth from the year-ago quarter.

At a margin of 40%, Palantir delivered $476 million net income (GAAP). Overall, the company now has $6.4 billion in cash and cash equivalents. More importantly for investors, Palantir raised its FY 2025 revenue guidance to $4.396-$4.4 billion range, alongside raised adjusted free cash flow (FCF) guidance to $1.9-$2.1 billion.

Following the Q3 earnings release on Monday, PLTR stock is down nearly 2%, suggesting that even stellar headline numbers are insufficient to justify a valuation so far detached from traditional metrics of profitability.

At the same time, this will likely serve as another buy-the-dip opportunity for investors looking to catch up. This makes it exceedingly difficult to pin down a rational entry point, as the stock oscillates between its very real fundamentals and narrative-driven euphoria born of those fundamentals.

In the meantime, Wall Street Journal’s consensus puts the average PLTR price target at $178.90, significantly below the current price of $194.50 per share. The low end is $50, while the high end is $255 per share, reflecting the market’s struggle to reconcile Palantir’s exceptional growth with its stratospheric valuation.

Disclaimer: The author does not hold or have a position in any securities discussed in the article. All stock prices were quoted at the time of writing.