Palantir Technologies Stock Is Down 30%. Wall Street Says This Will Happen Next. (Hint: It May Surprise You.)

Palantir Technologies (NASDAQ: PLTR) delivered triple-digit returns in 2023, 2024, and 2025, but its momentum has stalled in 2026. The stock has dropped 30% from its record high as investors have rotated out of richly valued equities in response to macroeconomic uncertainty.

However, most Wall Street analysts think Palantir is deeply undervalued. The median target price of $200 per share implies 36% upside from its current share price of $146. And Dan Ives at Wedbush Securities thinks Palantir could be a trillion-dollar company by 2028, a prediction that implies 185% upside from its current market value of $350 billion.

Is Palantir stock a bargain at its current price?

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The bull case: Palantir is a leader in AI decisioning platforms

Palantir initially developed data integration and analytics software for government agencies in the defense and intelligence sectors. However, the company has since adapted its software to support use cases across commercial industries, and it has introduced an adjacent artificial intelligence (AI) platform called AIP.

AIP is a large language model (LLM) orchestration tool that lets developers build generative AI features into applications and business processes. Dan Ives has called it the "gold standard when it comes to AI use cases." And Forrester Research has ranked Palantir as a leader in AI decisioning platforms.

Palantir reported exceptional fourth-quarter financial results. Its customer count climbed 26%, and its net revenue retention rate hit 39%, the ninth straight acceleration. Meanwhile, sales increased 70% to $1.4 billion, the 10th straight acceleration, and adjusted earnings increased 79% to $0.25 per diluted share. The company also posted a phenomenal Rule of 40 score of 127%.

Morgan Stanley analyst Sanjit Singh sees Palantir emerging as the standard in enterprise AI. "It's hard to find a better fundamental story in software," he wrote in a recent note to clients. "Palantir is not only delivering the best growth in public company software, but also the best profitability."

Mark Gibbens, chief investment officer at Gibbens Capital Management, recently told Charles Schwab that Palantir was somewhat insulated from concerns about AI disrupting the software industry because the company does not develop LLMs, but rather helps customers integrate LLMs into operations.

Looking ahead, Grand View Research estimates AI platform spending will increase at 38% annually through 2033, driven by particularly strong adoption across healthcare, finance, manufacturing, and retail. Palantir's revenue growth could easily match that pace.

The bear case: Palantir is the most expensive stock in the S&P 500

The problem with Palantir is valuation. CEO Alex Karp has repeatedly brushed aside those concerns. He has even said analysts who have expressed skepticism about Palantir due to its rich valuation have effectively robbed potential shareholders of a windfall. The problem with that argument is this: History says investors with a buy-at-any-price mentality will eventually get burned.

Palantir achieved a price-to-sales (P/S) ratio of 137 in August 2025, which made it one of the most expensive software stocks in history. Only seven other software companies have ever traded above 100 times sales, and all of them declined at least 70% after hitting their peak valuation. Palantir has so far been the sole exception, though the stock is down 20% since August 2025, and shares could certainly fall further.

Today, Palantir trades at 78 times sales, which seems cheap compared to where the stock has traded in the past. But Palantir is still the most expensive stock in the S&P 500 by a wide margin. The closest contender is Texas Pacific Land at 38 times sales. That leaves Palantir vulnerable to a substantial drawdown at the first sign that growth is slowing. For that reason, I think investors should keep any positions in Palantir relatively small.

Charles Schwab is an advertising partner of Motley Fool Money. Trevor Jennewine has no position in any of the stocks mentioned. The Motley Fool recommends Charles Schwab and recommends the following options: short March 2026 $100 calls on Charles Schwab. The Motley Fool has a disclosure policy.