After Another Blowout Quarter, Is Palantir Technologies Stock a Buy?

Palantir Technologies (NASDAQ:PLTR) continues to do the improbable: improve upon an already high growth rate. Every time I think the business is inevitably due to slow down, it proves me wrong.

The company did that yet again when it posted its third-quarter results on Monday. Its growth rate accelerated to 96% (it was 93% in the previous quarter), and it easily beat expectations. Yet the stock's been trading lower in recent days amid a great deal of softness in the tech sector.

Is Palantir's stock a no-brainer buy right now, and could this be the catalyst that sends it to a new all-time high?

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Palantir hits multiple milestones in Q3

The data analytics and artificial intelligence (AI) company's latest results covered the three-month period ending Sept. 30. Revenue for the period totaled $2.31 billion (higher than analyst projections of $2.18 billion), marking the first time that the company generated more than $2 billion in revenue during a single quarter. It's a tremendous achievement for the business, as in 2022 its annual revenue was just below that level. Palantir has been on an incredible tear, with its growth accelerating as more customers seek AI-powered intelligence.

Another big milestone was the shift to a greater share of commercial revenue. For the first time, the company's U.S. commercial revenue exceeded its U.S. government revenue ($984 million versus $953 million). It's a great sign that the company is growing and expanding into other areas besides government agencies.

Palantir's adjusted earnings per share (EPS) came in at 44 cents, which was higher than the 41 cents analysts were looking for.

Overall, it was another tremendous quarter for the company, highlighting its impressive and incredible growth. But the stock has been trading lower in recent days, and in after-hours trading it was showing a big drop as well, as the market may be growing concerned about its high valuation at a time when tech stocks as a whole are under pressure.

The stock may be down, but it’s still not cheap

Palantir's business is doing exceptionally well, but its profitability remains fairly low relative to earnings. At $0.44 EPS, that would extrapolate to an annual run rate of $1.76 if it maintained the same level of profitability for four quarters. The stock closed at just over $178 on Monday, meaning that it's trading at more than 100 times earnings. It's a steep multiple, which may be tough to justify, even given its high growth rate.

While Palantir's stock looks like an intriguing buy on weakness, and long-term investors may want to consider buying it in light of its consistently strong results, I wouldn't call it a no-brainer buy simply because its valuation is already fairly high; impressive levels of growth are already priced in, which is why the stock isn't a surefire bet to take off, even after posting such impressive numbers.

David Jagielski, CPA has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Palantir Technologies. The Motley Fool has a disclosure policy.