Why Palantir's $165 Stock Price May Not Hold Through 2027

Palantir Technologies (NASDAQ: PLTR) presents an intriguing paradox for investors. The company’s operational achievements have been nothing short of spectacular, yet its valuation metrics suggest the market may be pricing in an implausibly optimistic future.

The Business Case Is Genuinely Strong

From its humble position below $7 in early 2023, Palantir Technologies has emerged as a quiet winner in the AI revolution. While competitors have competed fiercely for data center infrastructure and chip dominance, Palantir carved out a unique niche: specialized AI software solutions.

The company serves government agencies and enterprises by creating intelligent software that processes and interprets massive datasets. Real-world applications span supply chain optimization, fraud detection, crime prevention, and military operations. The adaptability of Palantir’s platform means virtually any sufficiently resourced organization could benefit from its services.

Last year’s launch of the AIP platform proved to be a genuine inflection point. Growth has accelerated consistently since:

• Recent Revenue: $3.9 billion over the trailing twelve months
• YoY Growth Rate: 63% in Q3—exceptional for a company operating at this scale
• Profitability: Already generating 28% net profit margins
• Customer Base: Merely 911 total clients, suggesting enormous expansion runway

The narrative here is compelling: massive TAM, profitable growth, and proven execution.

Where Valuation Becomes the Story

The contradiction emerges when examining what the stock’s current price has already captured. At $165 per share, Palantir trades at metrics that strain historical precedent:

• P/S Ratio: 108x revenue
• P/E Ratio: 385x earnings

Consider the math: at current revenue multiples, an investor would need over a century of company profits (assuming zero growth) to break even. The valuation has become decoupled from fundamental realities that have historically constrained even the most exceptional growth stories.

Even Nvidia, which has become synonymous with the AI boom, rarely exceeds 40x revenue. Palantir operates at nearly triple that multiple.

The 2027 Scenario

Consensus expectations for 2027 suggest continued acceleration. Wall Street currently projects $4.4 billion in revenue for 2025, with 41% growth thereafter. If analysts’ historical pattern of upward revisions persists and growth reaches 50%, revenue could hit $6.6 billion.

The critical variable isn’t revenue growth—it’s valuation compression. Several scenarios illustrate the sensitivity:

Even a modest decline to a 40x P/S ratio—still extraordinarily elevated by historical standards—would push the stock to approximately $112 per share. A more normalized 30x multiple would cut valuations roughly in half.

Why Reversion Is Likely

Historically, equity multiples of this magnitude don’t persist indefinitely. Market cycles, competitive dynamics, or even minor execution stumbles can trigger sharp sentiment shifts. Any softness in growth rates or broader market pullback would be especially painful given the stock’s current valuation architecture.

Palantir remains an exceptional business. The question isn’t whether the company will continue growing—it almost certainly will. The question is whether current pricing rationally reflects that growth. History suggests otherwise.

Base case prediction for early 2027: $112-120 per share, representing a significant correction from current levels while maintaining a premium valuation relative to historical norms. For risk-conscious investors, current levels may warrant caution until valuations normalize to more sustainable multiples.