Prediction: 2 Stocks That Will Be Worth More Than Palantir 3 Years From Now

Palantir (NASDAQ: PLTR) is one of the most valuable companies in the world, with a market cap of around $250 billion. That places it within the top 50 largest companies, but some (including myself) question whether this is a legitimate valuation.

While Palantir had great success and is a strong company, a few items cause me to question this valuation, which could lead to some other stocks being worth far more than Palantir just three years from now.

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Is Palantir overvalued?

Palantir is a fantastic company. Its AI-powered data analytics platform is growing at a strong pace and has important clients in the government and commercial sectors. However, the stock valuation is unsustainable.

PLTR PS Ratio data by YCharts

Palantir's valuation got out of control at over 200 times forward earnings and nearly 100 times sales. It doesn't have the required growth to justify those valuations, and I wouldn't be surprised if the stock crashes within the next three years.

For reference, AI powerhouse Nvidia has never traded for more than 45 times sales and 50 times forward earnings since its run began in 2023, and revenue grew at a maximum pace of 265% year over year during that period. Palantir's fastest growth since 2023 was 36%, so it clearly doesn't have the growth needed to justify this unreal price tag.

While many companies are likely to surpass Palantir in valuation over the next few years, two that I think could easily do so are Adobe (NASDAQ: ADBE) and CrowdStrike (NASDAQ: CRWD).

Adobe

Adobe likely needs no introduction. It is the industry standard when it comes to digital media design tools. While there have been some concerns over various generative AI platforms taking over Adobe's market position, Adobe launched AI tools to combat this rise and ensure its platform stays at the top. Furthermore, the designer's control over the finished product is far greater with Adobe's product suite, so it will continue to maintain a strong leadership position in this field.

However, its stock has been slammed over these fears, and now trades for a dirt-cheap 18 times forward earnings and 7.4 times sales.

ADBE PS Ratio data by YCharts

This is an incredibly attractive price for a company that consistently maintains strong results. Furthermore, despite Palantir's superior growth rate, it will take years for Palantir to catch up to Adobe's revenue total. Over the past 12 months, Palantir and Adobe generated $2.86 billion and $22 billion in revenue, respectively. If Palantir maintains a 35% growth rate for the next decade, and Adobe's growth rate is 10%, they will each produce about $57 billion in revenue.

Considering Wall Street analysts project Palantir's growth to be only 31% in 2025 and 28% in 2026, this is too bullish an assumption for Palantir to maintain a decade of 35% growth. Eventually, the market will sell off Palantir's stock due to its high valuation and buy up Adobe's due to its cheap stock price, and that flip will send Adobe's stock to a higher valuation than Palantir's in the next three years.

CrowdStrike

CrowdStrike is more on Palantir's playing field. It's a top-tier supplier of cybersecurity software and posted similar growth rates to Palantir. However, CrowdStrike's growth has been slowing at about the same time that Palantir's has ramped up.

PLTR Operating Revenue (Quarterly YoY Growth) data by YCharts

Still, CrowdStrike has a strong lead on Palantir regarding revenue.

PLTR Revenue (TTM) data by YCharts

While Palantir's growth rate in 2025 and 2026 will likely exceed CrowdStrike's, its valuation at 27 times sales is slightly more reasonable, although it's still very expensive at this level.

CrowdStrike's growth is expected to be about 20% for the next two years. Over the next three years, if Palantir maintains a 35% growth rate and CrowdStrike delivers 20% growth, both companies will have around $7 billion in revenue. We've already established that Palantir's 35% growth rate is too aggressive, and the 20% for CrowdStrike is likely a bit conservative. As a result, I think there's a strong chance that CrowdStrike and Palantir's valuations will converge, and CrowdStrike could overtake Palantir.

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Keithen Drury has positions in Adobe, CrowdStrike, and Nvidia. The Motley Fool has positions in and recommends Adobe, CrowdStrike, Nvidia, and Palantir Technologies. The Motley Fool has a disclosure policy.