Wall Street Is In Love With Palantir’s Recent Flawless Execution, Yet One Analyst Asserts “Valuation Cannot And Should Not Be Irrelevant,” And Another Thinks The Stock Will Remain “Range-Bound”

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The market is hell-bent on punishing the shortfalls instead of rewarding the beats over consensus expectations this earnings season. So, when one looks at the confounding ~9 percent decline in Palantir's share price despite having delivered a near-flawless quarterly result, it is important to remember that this macro paradigm is responsible for Palantir's aberrant price action, with shortfalls in relation to the unrealistically optimistic whisper numbers providing the requisite bearish ammunition for now.

For the benefit of those who might not be aware, Palantir is an AI-powered Software-as-a-Service (SaaS) provider that allows companies and government agencies to gather and analyze reams of data, enabling the detection of hidden patterns within complex datasets.

The AI powerhouse announced its earnings for the first quarter of 2025 on Monday, boldly highlighting its 'Rule of 40' score, which stood at an eye-watering 83 percent in Q1'25. As a refresher, this rule posits that a company is healthy if its growth rate plus profit margin either equals or exceeds 40 percent.

As far as specifics are concerned, Palantir managed to grow its revenue by 39 percent year-over-year in Q1 to $883.9 million, handily beating Wall Street's consensus expectations pegged at ~36 percent.

Critically, Palantir delivered a trifecta of beats by exceeding consensus expectations on its top-line and bottom-line metrics as well as raising its guidance, with Mizuho analyst taking pains to note that the company's management "raised its FY25 guidance by much more than the 1Q beat."

According to Morgan Stanley, Palantir is "firing on nearly all cylinders," with the company managing to close "139 [government] deals over $1 million in TCV, including 51 deals over $5 million and 31 over $10 million," culminating in an acceleration in its year-over-year quarterly revenue growth to over 45 percent.

On the commercial side of things, Palantir inked a record $810 million worth of deals in Q1, corresponding to a year-over-year growth of 183 percent. Do note that Palantir was a tad weak in the international commercial segment, where it reported a negative year-over-year growth of 5 percent.

HERE'S WHAT ANALYSTS HAVE TO SAY AFTER $PLTR EARNINGS:

1) DA Davidson – $115 PT – NEUTRAL (Raised from $100) - Gil Luria

"Palantir reported a strong quarter with revenue growth accelerating further due to 'unrelenting' demand in a seasonally light quarter. Despite recent… pic.twitter.com/7qA1dTOm02

— Wall St Engine (@wallstengine) May 6, 2025

Overall, Wall Street analysts remain ecstatic, with Goldman Sachs analyst Gabriela Borges going on to note:

"We continue to view Palantir as well positioned to continue to deliver best-in-class growth given the secular trend towards enterprise AI adoption; the continued push for efficiency and technology adoption in the US government; and adoption of Operation Warp Speed among new defense entrants, traditional defense companies, and the broader manufacturing industry."

Borges does introduce a cautionary note, though:

"Our positive view of Palantir's growth is balanced by longer term ecosystem risks (the industry moving from peak custom to more off the shelf adoption) and the stock premium valuation."

This cautionary note echoes that from Mizuho, whose Gregg Moskowitz thinks that "valuation cannot and should not be irrelevant, and we find it very difficult to justify PLTR's very high multiple - 60x CY2026E revenue - that in our view already discounts material acceleration and upside versus consensus expectations."

Elsewhere, Wedbush analyst Dan Ives highlighted that Palantir is "gaining traction in Europe with its recent NATO partnership as more organizations look into scaling more use cases across operating systems."

As we noted recently, Palantir's Maven Smart System is a "battlefield situational awareness platform" that aggregates and analyzes data from multiple sources to present a holistic picture of the battleground.

Ives concludes by declaring:

"We view Palantir as a generational tech name that we see as a trillion market cap over the next three years with PLTR being a core name in the AI Revolution theme over the coming years."

Similarly, Jeffries analyst Brent Thill highlighted Palantir's impressive guidance, "with CY25 rev raised >6x the 1Q beat driven by AIP demand and implying 36% y/y growth vs 29% in CY24 alongside 44% opm and ~43.5% FCF margin."

Thill, however, also cautioned on valuation:

"Fundamentals are clearly alive, but we think irrational valuation at 56x CY26 rev skews risk/reward negatively."

William Blair analyst Louie DiPalma expects Palantir's revenue growth to slow down in H2 2025, leading to a multiple compression for the high-flying stock, which is now back near its all-time highs. Consequently, DiPalma expects Palantir shares to remain range-bound over the next year relative to the current price levels.

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