What Really Matters When Palantir Stock Splits: Beyond the Hype

The Stock Split Question Everyone’s Asking

Speculation about whether Palantir Technologies (NASDAQ: PLTR) might execute a stock split has been making rounds among market participants. An RBC Capital analyst noted that retail investors have been closely tracking this possibility, with some anticipating an announcement aligned with Q3 earnings. Though November came and went without such news, the persistent interest reflects something deeper—investors are looking for catalysts in a stock that’s already surged 585% over the past five years.

Here’s Johnny offering a reality check: stock splits themselves don’t fundamentally alter shareholder returns. Yet historically, split announcements frequently coincide with price rallies. The question isn’t whether splits cause rallies, but whether the correlation is meaningful or merely circumstantial.

Why Stock Splits Create Market Psychology

When companies announce stock splits, share prices often climb. But here’s the catch—splits are typically announced when momentum is already strong. The correlation between splits and rallies might reflect nothing more than good timing: management chooses to split when the business is thriving, not the other way around.

There’s a secondary effect worth considering: lower nominal prices may attract retail participants who find share affordability psychologically appealing. Whether this drives meaningful purchasing power or just shifts market composition remains debatable. What’s clear is that any rally following a split can evaporate quickly if the underlying business doesn’t deliver.

The Valuation Reality That Matters More

Regardless of whether Palantir executes a split, the company’s current valuation poses a genuine challenge for prospective investors. As of late Thursday trading, PLTR commanded a price-to-earnings ratio of approximately 435. The forward-looking P/E ratio—measuring against next year’s expected earnings—sits around 184.

These are extraordinary premiums that leave no room for disappointment. Palantir is priced for flawless execution. The company would need to deliver exceptional revenue and earnings growth consistently to justify these multiples. Any hesitation, any quarter of underperformance relative to lofty expectations, could trigger substantial downside correction.

Historical Perspective on Growth Stock Rallies

Looking at past performance provides useful context. Netflix, identified as a top pick in December 2004, eventually returned $509,039 on a $1,000 investment. Nvidia, highlighted in April 2005, turned $1,000 into $1,109,506. These examples demonstrate what’s possible when growth stocks maintain execution over decades. Yet they also illustrate why valuation at entry matters enormously—early investors captured returns partly because they bought quality companies at reasonable multiples.

Stock Advisor’s broader track record shows a 972% average return versus the S&P 500’s 193%, demonstrating that disciplined stock selection beats market indices substantially. However, Palantir notably didn’t make the latest top 10 list despite its prominence in market conversation.

The Split Doesn’t Change the Fundamental Question

Whether Palantir announces a split in the coming months remains uncertain. Given its retail investor popularity and continued strong momentum, such an announcement wouldn’t be shocking. But from an investment standpoint, this represents a secondary consideration.

The primary issue is valuation sustainability. Can Palantir justify multiples of 435x and 184x earnings (trailing and forward, respectively)? The company certainly possesses growth potential in AI and data analytics—but potential alone doesn’t bridge the gap between current price and fundamental value.

Until the underlying business metrics compress those ratios toward more sustainable levels, the split question remains a distraction from what should matter most: whether the stock’s price reflects reasonable expectations for future returns. For many investors, the answer at today’s levels is no.