Should You Buy Palantir Stock Right Now?

Key Points

• Palantir has been the S&P 500's best-performing stock since the start of 2024.

• U.S. Commercial was Palantir's fastest-growing segment in the latest quarter.

• Palantir's current valuation is one of the highest we've seen in the stock market.

• 10 stocks we like better than Palantir Technologies ›

Palantir's (NASDAQ: PLTR) stock has been on quite a run over the past couple of years, up 940% since the start of 2024. Much of it can be attributed to the overall artificial intelligence (AI) interest surrounding the market, while the other factor is the growth in Palantir's commercial business.

While Palantir started as a data software and analytics company aimed at catering to government agencies, its new Artificial Intelligence Platform (AIP) has shown promising growth in the private sector. In the second quarter, its U.S. commercial business was its fastest-growing segment, increasing revenue 93% year over year to $306 million. Considering the impressive growth that Palantir has shown, is its stock a buy right now?

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Image source: Getty Images.

The short answer to whether or not you should buy Palantir's stock right now is no, but it doesn't have to do with its business performance. The reason is its extremely high valuation. Palantir is currently trading at 275 times its projected earnings over the next 12 months.

With such a high valuation, it's obvious that investors have extra lofty expectations for Palantir. In fact, many would argue that they are too lofty. To grow into this valuation, Palantir would need to sustain earnings growth over many years that seems very far-fetched. Anything short of Palantir meeting its lofty expectations would likely lead to a sharp pullback in its stock price.

If you currently hold Palantir's shares, I would hold on to them. But now doesn't seem like an ideal time to make your first investment or add to your stake.

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Stefon Walters 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.