We came across a bullish thesis on Palantir Technologies Inc. (PLTR) on Substack by Kontra Investments. In this article, we will summarize the bulls’ thesis on PLTR. Palantir Technologies Inc. (PLTR)'s share was trading at $116.65 as of Feb 10^th. PLTR’s trailing and forward P/E were 613.95 and 208.33 respectively according to Yahoo Finance.

A person using a laptop with a blue background showing the software platform's user inteface.

Palantir Technologies has recently reported a strong set of financial results, with remarkable growth in both revenue and commercial traction, driven by its AI-powered data analytics solutions. In Q4 2024, Palantir posted a 36% year-over-year revenue growth, with significant contributions from its commercial segment, which saw a 64% surge, and government contracts, which grew 40%. The company's increasing adoption of its AI Platform (AIP) led to a 134% jump in total contract value from U.S. commercial clients. This impressive performance has led to a raised 2025 free cash flow forecast, from $1.44 billion to $1.71 billion, along with a positive EBIT margin forecast expansion.

Despite these solid results, Palantir's valuation has drawn attention. The stock trades at a high 116x forward free cash flow multiple, a premium even in the high-growth tech space. Its EV/FCF multiple of 121x and price-to-earnings ratio of 81.6x reflect the market’s confidence in Palantir's future, but they also signal that much of this growth may already be priced in. A comparison with peers such as NVIDIA and Snowflake shows Palantir’s valuation is notably higher, despite slower revenue growth, making it a more expensive bet.

Palantir's strong free cash flow trends and profitability are encouraging, but its valuation leaves little room for error. With AI model costs potentially falling and competitors like Databricks gaining traction, Palantir faces risks that could put downward pressure on its pricing model. While the company remains a leader in AI-driven analytics, investors should remain cautious, balancing the strong growth narrative against the high valuation, limited visibility on government contracts, and competitive threats. Given these factors, potential investors may want to be wary of the risks associated with entering at such a premium price point.

Palantir Technologies Inc. (PLTR) is not on our list of the 30 Most Popular Stocks Among Hedge Funds. As per our database, 43 hedge fund portfolios held PLTR at the end of the third quarter which was 44 in the previous quarter. While we acknowledge the risk and potential of PLTR as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than PLTR but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.

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Disclosure: None. This article was originally published at Insider Monkey.