Should Investors Chase Skyrocketing Palantir Stock?

Bearish   

The share price of big data analytics company Palantir Technologies is up 23% today following the publication of its Q4 earnings report. It revealed another impressive quarter of growth across all important metrics. For the full year, total revenue rose 29%, while adjusted free cash flow came in at $1.25B. For 2025, Palantir expects another 30% of sales growth and roughly $1.6B in free cash flow.

Given these numbers, the future of Peter Thiel’s company looks bright no matter how you slice it. Does this make the stock a good investment at today’s price, though? It depends on one’s time horizon. According to the Elliott Wave chart below, the price might as well keep rising in the not-so-distant future. The long term, however, is a different story.

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Palantir stock surges on strong Q4 results

Assuming a five-wave impulse has been in progress since the bottom in late-2022, it looks like wave 3 is on the verge of completion. Its five sub-waves are also visible and marked i-ii-iii-iv-v. If this count is correct, waves 4 down and 5 up have yet to complete the pattern. Given how fast the price is moving, we could be talking about just a few months’ time.

And this is where the short-term positive outlook gives way to a long-term negative one. According to the Elliott Wave theory, a three-wave correction follows every impulse. In the case of Palantir stock, it is likely to be a deep one for one simple reason: the company’s valuation is insane.

Following today’s surge, it has a market cap of more than $230B. Taking management’s 2025 guidance at face value, Palantir trades at 62 times revenue and 145 times free cash flow. We doubt that even a 30% revenue grower can ever justify such extreme multiples. The party could go on for a while, but when the music inevitably stops, it shouldn’t come as a surprise if the stock falls all the way back to 2023 levels.

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