PLTR valuation is too rich relative to market cap; despite bullish news on Maven contracts, the stock offers no good ROI and faces downside risk if growth decelerates.

Palantir is red hot, 177.50. I mean, what a hot stock. That one up almost 5,000 here today.

Palantir investors, I got some news for you, okay? Or people that are interested in Palantir, I got a little lesson for you in regards to that as well.

Listen, Palantir is insane, okay? This is from the June lows. This is a two-month chart. So, this is where the stock was two months ago versus today. It's up 65%. I mean, that's insane.

You know, think about that for a moment. 65% move, two months, right?

So, what's going on here in regards to Palantir? Well, Palantir in focus as William Blair sees Maven surging toward billion-dollar annual recurring revenue, that's ARR. Palantir Maven artificial intelligence platform is surging toward generating at least $1 billion in annual recurring revenue, investment firm William Blair said on Wednesday.

Our government dotted line tracker and media reports suggest that the Pentagon continues to go all in on Palantir's Maven smart system, William Blair analyst wrote in a note to clients.

Our tracker indicates that the Maven smart system is by far Palantir's largest overall contract in the Department of War program is trending toward a billion-dollar annual revenue run rate across numerous contracts.

All signs point to continued strong growth over the next 9 months as the Maven smart system is expected to achieve a program of record POR status.

So, they put Palantir to an outperform rating here, right? Talked about several media outlets have reported that the Pentagon is looking to boost funding for Palantir by $244 million between now and March 2027.

So, I mean, first off, this is really good news for Palantir, right? I mean, the fact that the government is continuing to go all in on this, very very good news, and it's likely going to be continued good news for the short term, right?

Now, keep in mind, in the future, different administrations are going to get in office, different politicians are going to get in office, contracts could change over the next 5, 10, 15, 20 years, so that's something to keep in mind here, but I mean, usually once you sign up for Palantir, you start really using it in a major way, it's hard to leave it.

And I think that's generally true for a lot of SaaS-related stuff, right? And a lot of software, but I mean it's just hard to see like the Department of War, let's say, using and relying on Palantir heavily, right?

And then saying, you know, 3 years from now, oh, we're just not going to use Palantir anymore. Like all things are possible, but that's pretty unrealistic, right?

Now, could growth rates slow way in the future? That's very possible, right? So, maybe the government's spending, you know, incredible amounts to Palantir right now, but could that slow down 2 or 3 or 4 years from now?

Sure, that that could slow down. So, that's just something to keep in mind, but the moral of the story is here uh it's bullish news for Palantir, right?

And for us bulls it's just more conviction in kind of what's going on here, okay? Look at that. Palantir's market cap is $426 billion. So, it's like, oh, it's so exciting, you know, the Maven the Maven artificial intelligence platform surging toward billion-dollar annual recurring revenue.

That's great, but it's just it's the market cap so big. We need this to scale to $10 billion annual recurring revenue, like, you know, $50 billion, $20 billion, right? Like to to really have a substantial impact on the market capitalization of the company, right?

Because then you could talk about throwing off several billion dollars a year in just profits from that, right? And then you can talk about kind of evaluation re-rating, but right now, I mean, it's just it's a very small side of the business compared to how large the market cap is, and that's the issue.

You know, if you bought Palantir a few years ago, you've made 2,000% on it, easy, right? The issue we have here is the stock has gone up so much, it priced in a lot, right?

And so, if we look at something like this, right? Palantir forward P is over 100. Two-year forward P is 57, right? That's issue. You're going to have revenue growth that have, you know, very shortly here will start to decelerate the growth rate, right?

So, that means they're still going to be growing revenues at a rapid clip, but it's going to be a little less as a percent, a little less, a little less, a little less, right? And it's a whole cycle you have to go through.

And, you know, when you're already trading at 100 plus forward P, you're up there. And that's the issue you have with Palantir.

Here are my Palantir projections over the next several years, okay? So, I have in my bull case at Palantir growing revenue 40% in 2027, 30% 2028, 25% 2029, and then 20% in 2030.

And then, under a bull assumption, I think they could be around that 20 that high teens to low 20s growth rate for several years into the 2030s, essentially, okay?

And then, net income growth, I have them doing 50% net income growth in '27, 40% in '28. So, significantly above what, you know, what their revenue is coming in at. 35% here, 30% here, right?

And so, under this a scenario, you're going to get a P ratio re-rating as the growth rate slow over the next, you know, four to five years, right? And so, you used to be able to pay 100, 150, 200 P ratio, but when the growth rate start to go down and down and down when it comes to, you know, the rate of growth, you're going to be willing to pay less for that company, right?

And so, the interesting scenario here is even under this bull assumption, right? I get them at a 35 to 40 P come 2030, right? Which is very rich compared to market in general, but I still think Palantir can be growing at a much faster clip than an average stock in the stock market, right? So, I think it's priced appropriately here.

There's just not a good ROI on Palantir. You're talking about the stocks in the low 200 in 2030 under this scenario, right?

Base case, my base case for Palantir, 35% growth next year, then down to 25%, then 20%, 15%, right? 45% net income growth, 35% net income growth, 30%, 25%, right? And then I have them at a 30 to 35 PE come 2030.

So, you know, in this scenario, basically there's no return for Palantir or a slightly negative return, right?

And so, you don't even want to see the bear case. The bear case is ugly, right? The bear case is huge losses over the next several years, right? And that's still with great growth rates, right?

So, you're if you're betting on Palantir stock, you're really counting that the growth is going to be insane for super long into the future. And when I say insane, you know, listen, 40 and 30 and 25 and 20% growth rates are amazing.

That is phenomenal. But you really need Palantir to be growing consistently at, you know, [clears throat] 40, 50% revenue a year, year in and year out for the next four or five years to really make big money on this stock.

And you need minimum 30 to 35% on average to just do decent.

And that's the thing you got to understand about stock like Palantir.

And so, you think about this for a moment, right? People hated Palantir at $7 back in 2022. They refused to touch it. The stock went down to the high fives. I think it was like $5.98 or something a share at the very lows.

Think about that. People were still selling Palantir at $5 and $6 a share. Think about that for a moment, right?

And then last year comes and people are just jumping over themselves to pay $200 a share for Palantir. The only reason that happens cuz people don't know how to properly value I When I was buying Palantir at seven bucks, right?

You know what I mean? Like changing money on that?

I mean, that was one of those stocks. It was like, "Oh my gosh, like if growth rates just accelerate where we think they're going to accelerate, the stock's a a 2x to 4x opportunity over the next few years, right?"

And then it was like, "If growth rates kind of go to this place, we're going to get like a 10x on the stock and it's going to go from seven to 70, right?" And then it was like, "Well, if this scenario happens, we're going to go 100 plus."

And the best case scenario happened and we went 100 plus. We went all the way up to 200, right?

But you got to know how to value these companies. Cuz that could be the difference between you running into Palantir last year at 200 or you buying in 2022 at seven bucks, right?

It's a big big difference. Like one is like you hope to maybe make money over the next few years and you need everything to go perfect and the other is like we got this in the bag. We're going to make game-changing money, right?