What kind of company is Palantir Technologies [PLTR], which has been rapidly growing, and what are the points for investment in this data analysis company? -The Road to Mastering U.S. Stocks by Heihachiro Okamoto- Investment information from Monex Securities and a media useful for money

In recent years, investor interest in Palantir Technologies [PLTR] (hereinafter referred to as Palantir) has been rapidly increasing. The reason for this is its astonishing stock price performance. The stock price rose by approximately 340% in 2024, and as of February 18, 2025, it has also recorded a rise of 65%. So, what kind of company is Palantir and why is it receiving so much attention? This time, we will explain its business content, strengths, background of growth, and investment risks in an easy-to-understand manner.

The giant of data analysis, Palantir Technologies [PLTR]

Palantir is an American software company founded in 2003 by Peter Thiel (co-founder of PayPal) and others. The company provides advanced data analytics and artificial intelligence (AI) solutions, with a strong focus on supporting data utilization for government agencies and businesses.

Peter Thiel founded based on insights gained from PayPal

Peter Thiel and Elon Musk were founding members of PayPal Holdings (PYPL). Musk founded his own company, X.com, and Thiel founded Confinity, respectively, and in 2000, the two companies merged to form PayPal. After the merger, Mr. Musk temporarily served as the CEO of PayPal, but due to internal disagreements, Mr. Thiel became CEO and Mr. Musk was removed from management.

In 2002, PayPal was acquired by eBay for about $1.5 billion, and Mr. Thiel and Mr. Musk each obtained a huge amount of capital. Mr. Musk went on to establish Tesla [TSLA] and SpaceX, while Mr. Thiel applied the fraud detection technology developed at PayPal to launch Palantir. Additionally, Mr. Thiel later founded Founders Fund, which became an early investor in SpaceX.

The current CEO of Palantir, Alex Karp, is called the “maverick of Silicon Valley” and says he does not try to hide his strong ties with the government. This aspect may remind you of Mr. Elon Musk.

What is Palantir’s business model?

Government business (approx. 55% of revenue)

Palantir has built deep relationships with US government agencies such as the CIA, FBI, and the Department of Defense since its inception, working on projects involving the analysis of confidential data and national security.

One of the representative software is “Palantir Gotham”. This is used in the military, intelligence, and cybersecurity fields, and is used for terrorism monitoring and criminal investigations.

Palantir has also received funding from the CIA’s investment arm, ‘In-Q-Tel,’ and is a highly trusted company by the government. The information analyzed by Palantir’s software is used for strategic decision-making in counterterrorism efforts in Iraq and Afghanistan, contributing to the safety of soldiers. Palantir analyzes vast amounts of data in real-time, visualizes relationships, and contributes to the government’s operational efficiency, standing out as a company that ‘supports the nation from behind the scenes’.

Business for private enterprises (about 45% of revenue)

Since 2016, Palantir has fully expanded its business for private enterprises. The flagship product for enterprises is ‘Palantir Foundry’, which is used for supply chain management and financial risk analysis. This allows for instant processing of complex data, supporting rapid decision-making for businesses.

For example, in a bank like JPMorgan Chase [JPM], it is used for detecting fraudulent transactions and risk management, while in manufacturing industries such as Ford Motor Company [F], it is used for optimizing supply chains and quality management.

In the healthcare industry, it is being utilized for medical data analysis, predicting the spread of infectious diseases, and more. In fact, during the pandemic, Palantir’s technology was used to optimize vaccine supply and predict infections, demonstrating its prowess in large-scale data processing.

The stock price of Palantir rose by about 340% in 2024.

【Chart】Palantir Technologies’ stock price trend since listing (September 2020~) Source: Created by Monex Securities from Bloomberg Palantir went public on the stock market on September 30, 2020. Although the stock price rose from $9.5 to $35.18 in about 4 months after the listing, it remained low for approximately 2 years and 9 months. The rise began around June 2023, and the stock price saw a significant breakout in September 2024. This was following the announcement on September 6 that Palantir was included in the S&P500 index.

With this announcement, the company’s stock price rose 14% the next day. In addition, the earnings announcement for the fourth quarter of 2024, which was announced on February 3, 2025, exceeded the prior forecast, and the stock price rose by 26% in one day the next day. Palantir’s stock price has risen by about 340% in one year of 2024 and 65% by February 18, 2025, raising expectations for further growth.

Palantir’s financial results for the fourth quarter of 2025 and future outlook

The financial results for the fourth quarter of 2024 showed a growth that exceeded the trends of the last five quarters. The sales growth rate recorded a growth of +36% compared to the same period last year, surpassing the growth of +30% in the previous quarter. In addition, the growth in the commercial sector was +31%, in the government sector was +40%, the growth in the number of customers was +43%, and there was a significant increase in the contract balance of the U.S. commercial sector by +99%.

In addition, the sales growth guidance for the first quarter (Q1) of 2025 is +35-36%, and the full-year (FY25) sales growth guidance is +31%, significantly exceeding market expectations (approximately 25% growth).

Regarding 2025, it was expected that the comparison with the previous year would become more challenging, but there is a high possibility of benefiting from government budget for administrative efficiency, and the growth of the government sector is expected to continue. In addition, as the business deployment to private companies is accelerating, an increase in sales to corporations is also expected.

In 2025, the consensus EPS forecast is $0.54, an increase of 31% compared to $0.41 in 2024, and a profit growth of 24% is expected for 2026, with $0.67 compared to the previous year.

Concerns about the high valuation of Palantir stock?

On the other hand, investors are concerned about the high valuation of Palantir stock. Using Palantir’s estimated EPS for 2026, the PE ratio is about 186 times, which is considerably higher than that of typical software companies (stock price as of February 14, 2025, $124.62). However, when Palantir first went public, there were times when the estimated PER was bought up to 360 times.

Because it is a very excellent growth stock, the stock price valuation can become very high. In terms of high valuation, Tesla stock is famous for being expensive. Tesla is attracting attention for its future growth potential, and we believe that the current stock price is justified. The same may be said for Palantir.

What is Palantir’s future growth potential?

Currently, it is in the early stages of the AI ​​generation boom, and the company’s technology is considered to continue to attract high attention.

Palantir’s sales are expected to increase by 30% compared to the previous year in 2025, 27% in 2026, and around 30% in 2027. As an AI-related software company, it is rare for a company of Palantir’s sales scale ($3 billion) to maintain a growth of around 30%. Also, the operating profit is expected to expand from 39.4% in 2024 to 41.7% in 2025.

Palantir has been riding the wave of the AI revolution and has continued to grow steadily in both the government and commercial sectors. For 2025, despite a challenging competitive environment, the company has delivered significantly higher earnings guidance than expected, demonstrating the sustainability of growth. In addition, Palantir is at a turning point in growth, but it is said that cost control is thorough.

Although still a super-premium valuation, we believe it is a company that is likely to maintain a sales growth rate of over 30% in the future and is expected to grow in the long term.

The current state of Palantir, whose stock price is ahead of analysts

The consensus evaluation of Wall Street analysts also judges Palantir’s stock price as being too high. There are 24 analysts researching Palantir stock, with 21% recommending buying, 54% holding, and 25% recommending selling. The average target stock price of analysts is $91.17, so the current stock price is judged to be 27% too high. Looking at the previous trend, the stock price has risen, and the analysts are chasing after it. In other words, the stock price is running ahead of the analysts.

One thing to keep in mind is that investors’ expectations for Palantir are high, so any earnings error can have a significant negative impact on the stock price, even temporarily. In addition, if there is a market correction, it is conceivable that the stock price will make a major correction. This isn’t just because it’s Palantir, it’s what happens to any other fast-growing stock.

However, we believe that the company’s long-term growth trend remains unchanged, and basically, the current high valuation (high stock price evaluation) will continue to be maintained in the future. If there is a temporary stock price adjustment, we believe it will be a good investment opportunity.

What is the risk of Palantir stock investment?

Finally, let’s touch on the risks of Palantir. While Palantir has strong technology in the fields of security, surveillance, and business intelligence, privacy and ethical issues are often discussed. Much of the company’s revenue comes from contracts with government agencies (especially the US government), posing a risk of dependency on the government.

Contracts may be reduced or terminated due to government budget cuts or policy changes. It may be worth considering the possibility that a presidential election or a change of government will change the government’s IT investment policy and reduce dependence on Palantir.