Key Points
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The productivity gains from Palantir’s AIP transformed the company’s value proposition.
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The company’s valuation metrics arguably make it too expensive to buy.
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Investors should factor in its revenue growth before deciding to sell.
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The slide in Palantir Technologies (NASDAQ: PLTR) stock might leave investors wondering whether its run has come to an end. The stock has fallen 27% since the beginning of the year and 38% from its all-time high last October.
Nonetheless, investors should also remember that it reached those record highs because of its tremendous success in the commercial sector and the productivity gains it has made for its customers. Knowing that, is now the time to sell the stock, or should investors stand pat or possibly even look for buying opportunities?
The state of Palantir
Indeed, the massive growth numbers might leave investors wondering what’s wrong with Palantir stock and if it is worth buying at the current price. In the first quarter of 2026, its revenue exceeded $1.6 billion, up 85%. That exceeded its 56% revenue growth in 2025.
The company’s Artificial Intelligence Platform (AIP), its generative AI engine, changed the stock’s value proposition, bringing customers massive productivity gains.
Additionally, rather than relying on a sales force, Palantir brings corporate teams into “bootcamps,” facilitating their ability to build functional workflows and deploy them quickly. Such activities also help customers aggregate disconnected data and improve operational efficiency, which often persuades these clients to sign larger deals with Palantir.
Thanks to these customer productivity gains, the stock began a run in late 2024 as the company’s value proposition became apparent.
Unfortunately, such gains made Palantir stock expensive, and even with the aforementioned pullback, it remains expensive. Palantir’s P/E ratio is 146, which is high (but not outrageous) for a growth stock, but its forward P/E ratio of 88 confirms it is an expensive stock.
Indeed, much of that valuation premium likely stems from the aforementioned revenue increases. If it were to maintain 85% yearly revenue growth and a constant share price, its price-to-sales (P/S) ratio of 64 would drop to 36 in one year and 19 after two years. Still, that multiple could easily leave new investors with little near-term upside, especially if the stock’s investment thesis falls apart.
Hence, while numerous tech stocks have shown they can maintain higher valuations for years, investors have no reliable way to tell whether a stock may recover or face further declines at such levels.
Moving forward with Palantir stock
Given the company’s state and its stock, investors are likely better off treating Palantir as a hold.
Although the productivity gains from AIP have benefited the company’s customers and its shareholders, it has taken the stock’s valuation metrics to arguably stratospheric levels. If an investor buys the stock at 64 times sales, it could leave them exposed to considerable downside if the investment thesis worsens.
However, even if investors are nervous about its valuation, they should remember how revenue growth can affect such numbers, making a sell case for the stock uncertain at best. Thus, instead of selling the tech stock at these levels, investors are probably best served by doing nothing.
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Will Healy has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Palantir Technologies. The Motley Fool has a disclosure policy.
