Palantir Technologies (PLTR -1.91%) was the best performing stock in the S&P 500 (^GSPC 0.63%) in 2024. The company saw its share price surge 340% as robust demand for its artificial intelligence platform led to impressive financial results throughout the year.

Palantir has maintained its momentum in 2025. Its year-to-date return of 57% means it is once again the best performer in the S&P 500, partly because investors have shown a clear preference for software and services companies that may escape tariffs unscathed.

However, Wall Street clearly thinks investors should avoid the stock at its current valuation. Among the 27 analysts who follow Palantir, the media, target price is $96 per share. That implies 20% downside from the current share price of $120.

Read on to learn more.

Palantir is a recognized leader in a $100 billion-plus industry

Palantir develops data analytics software for commercial and government organizations. Its core products, Gotham and Foundry, let customers apply machine learning models to complex data to uncover insights and optimize decision-making. Its artificial intelligence platform, AIP, enhances the core products with support for large language models.

Palantir sees itself as the only software company that can help businesses operationalize AI — that is, move AI capabilities from prototype to production in a manner that creates real operational value. CEO Alex Karp told analysts, “We are the only company in America, the only relevant market, that will allow you to do useful things with large language models.”

Palantir reported strong fourth-quarter financial results that crushed expectations on the top and bottom lines. Customers increased 43% to 711 and the average existing customer spent an additional 20%. In turn, revenue increased 36% to $828 million, the sixth straight acceleration, and non-GAAP net income rose 75% to $0.14 per diluted share. The company is well positioned to maintain that momentum.

Forrester Research recently recognized Palantir as a technology leader in artificial intelligence and machine learning platforms, awarding AIP higher scores that similar solutions from Alphabet‘s Google and Microsoft. That makes the company a key player in a very large addressable market. International Data Corp. estimates AI platform sales will grow at 40% annually to hit $153 billion by 2028.

Image source: Getty Images.

What Wall Street expects from Palantir in 2025

Palantir will announce its first-quarter financial results after the market closes on Monday, May 5. Wall Street analysts expect another exceptional print. The consensus estimate says revenue will increase 36% to $862 million, while adjusted earnings increase 62% to $0.13 per diluted share.

However, the market may have greater expectations given that Palantir beat the consensus earnings estimate by an average of 13% over the last six quarter. Failure to meet those high expectations could cause a steep sell-off, especially when the stock trades at more than 100 times sales, a valuation multiple few software companies have ever attained.

Further ahead, Wall Street estimates Palantir’s earnings will increase 35% in 2025. That consensus makes the current valuation of 290 times earnings look very expensive. Those figures give a price-to-earnings-to-growth (PEG) ratio above 8, which screams overvalued. Traditionally, PEG ratio above 2 or 3 are considered high.

With that in mind, the most prudent course of action for prospective investors would be to wait for a better entry point before purchasing the stock. That doesn’t mean shares won’t rocket higher after the company reports earnings next week. But the risk-reward profile is heavily tilted toward risk right now, which means there are better places for investors to put their money.