Palantir stock surges on potential bid for U.S. defense contracts, but high valuation raises risk

From Nasdaq: 2024-12-31 00:16:09

Palantir Technologies stock (NASDAQ: PLTR) has surged by nearly 11% in the past five trading days and is up over 4.5x since the start of the year, now trading at around $82 per share. Recent gains are driven by talks of forming a consortium to bid for U.S. government defense contracts, potentially boosting its share of the $850 billion-plus U.S. defense budget.

The market frenzy around AI stocks, strong quarterly earnings, and optimism post-U.S. elections have contributed to Palantir’s recent rally. Co-founder Peter Thiel’s ties to the incoming administration and technical factors like inclusion in the Nasdaq-100 have also bolstered the stock. However, its historical returns have been volatile, contrasting with the more stable performance of the Trefis High Quality Portfolio.

Palantir’s stock is considered high-risk due to its high valuation, reliance on government sales, and insider selling. Trading at over 50x consensus FY’25 revenue, the stock may be disconnected from its fundamentals. While demand for its products is expected to rise with AI adoption, its current valuation poses a risk. Comparisons with other tech stocks like Snowflake and Nvidia highlight the potential disconnect.



Read more at Nasdaq: How Palantir Is Looking To Take On Big Defense Contractors