Should You Buy Palantir Before Its Next Earnings Report?

Palantir Technologies (NASDAQ: PLTR) released its third-quarter earnings report on Nov. 3, and in what's becoming a trend, the data analytics company blew past analysts' expectations. Revenue jumped 63% year over year to a new record high of $1.2 billion, and Palantir closed 204 deals of at least $1 million.

The company is expected to release its next earnings report in February. If you're debating whether you should invest in Palantir before then, here's what you need to know.

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Growth is already priced into Palantir stock

Palantir is one of the most expensive large-cap stocks right now, as it trades for 409 times trailing earnings. For perspective, current market leader Nvidia trades for 54 times trailing earnings, so Palantir is over seven times more expensive on that basis.

While Palantir's earnings are on the rise, the stock is likely going to stay extremely expensive leading up to its next earnings report.

In the third quarter, net income was $476 million, a 46% increase from the previous quarter. Let's imagine net income rises another 46% in the fourth quarter, which would put it at $695 million. That would give it $1.7 billion in net income for 2025. Even with that kind of income, Palantir's price-to-earnings (P/E) ratio would still be 240 at its current market cap of $409 billion.

One of the big risks with Palantir stock is that rapid growth is already expected, so even a great earnings report isn't necessarily going to move the needle.

Palantir is an intriguing investment, despite the hefty valuation. But you may want to keep your position small to start to avoid excessive risk, and it's always good to take a long-term perspective instead of putting too much importance on a single earnings report.

Lyle Daly has positions in Nvidia. The Motley Fool has positions in and recommends Nvidia and Palantir Technologies. The Motley Fool has a disclosure policy.