Palantir Stock Up 585% Gain! Is a Valuation Crash Coming? History Is Clearly

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Palantir Stock Up 585% Gain! Is a Valuation Crash Coming?

Palantir Stock Is Up 585% Since Early 2024. History Is Clear About What Happens Next.

Palantir Stock Is Up 585% Since Early 2024. History Is Clear About What Happens Next.

Palantir Technologies (NASDAQ: PLTR) earlier this month reported fourth-quarter financial results that crushed Wall Street's expectations. The stock has rocketed higher on the news, such that its total return since January 2024 now stands at 585%.

Palantir was the best-performing member of the S&P 500 (SNPINDEX: ^GSPC) during that period. In fact, it beat the next closest stock by 250 percentage points. But Palantir is now one of the most expensive software stocks in history, and there is little questions about what happens next: One way or another, it's valuation is going to fall.

Palantir is one of the most expensive software stocks of the past decade
Brent Thill at Jefferies in a recent CNBC interview praised Palantir for strong execution in the fourth quarter. But he also noted the stock has a forward price-to-sales (PS) ratio above 55, a valuation that few software companies have ever achieved and no company has ever maintained. To clarify, the forward PS ratio equals the market value divided by the forecasted revenue from the next year.

My own research led to the same conclusion. After looking at more than 50 software stocks over the last decade, here's what I found:

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