Palantir Stock (PLTR) Surges 460% in Five Years. Why I’m Bearish

Palantir Technologies PLTR -1.66% ▼ stock has surged more than 460% over the past five years, making it one of the biggest winners of the artificial intelligence (AI) boom. The global leader in breakthrough AI software has had a stellar run. However, this run has pushed the company’s valuation into expensive territory, with the stock now trading at roughly 114x forward earnings. At the same time, co-founder Peter Thiel recently filed to sell about $280 million worth of shares, adding to insider selling seen this month. In my view, the combination of a stretched valuation and insider selling leaves little margin of safety—reasons I remain bearish on Palantir stock.

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Peter Thiel, who co-founded Palantir in 2003 with Alex Karp, filed to sell $280 million worth of shares on March 3. Recent Palantir insider transaction data confirms that billionaire Thiel has been executing these sales since the start of this month. Although Peter Thiel’s sales represent approximately 1% of his total Palantir ownership, I believe Palantir’s valuation does not make the company an attractive investment opportunity today.

Peter Thiel Seems to Be De-Risking His Portfolio

I am bearish on Palantir, not because of Peter Thiel’s recent transactions. There is reason to believe that Peter Thiel is de-risking his portfolio by limiting his exposure to risky assets, especially tech stocks that have performed exceptionally well in the recent past.

According to the Securities and Exchange Commission (SEC) filings, Thiel Macro, the hedge fund managed by Peter Thiel, liquidated its entire portfolio and hoarded cash in Q4. Some of the biggest sales executed as part of this portfolio liquidation include Nvidia Corporation NVDA -1.58% ▼ , Microsoft Corporation MSFT -1.57% ▼ , and Apple Inc. AAPL -2.21% ▼ . Since Q2 2025, Thiel Macro has liquidated stocks worth over $212 million.

A closer evaluation of this strategic portfolio decision suggests Peter Thiel has turned bearish on the prospects for risky assets in general. This adds much-needed context to his recent Palantir sales. Rather than a lack of conviction about Palantir’s growth potential, Thiel seems worried about a broad market sell-off amid macro challenges and adverse geopolitical developments.

The Market Is Not Ready for the Law of Large Numbers

My bearish stance on Palantir is centered on its expensive valuation. Palantir’s forward P/E multiple of 114x makes the company look expensively valued. The real insights, however, are buried deep in its valuation. For Q4 2025, the company reported a Rule of 40 score of 127%. Rule of 40 scores are calculated by adding revenue growth and adjusted operating margin.

This puts Palantir in a league of its own. No other public enterprise software company is in this league. For context, Adobe Inc. ADBE -7.58% ▼ has a Rule of 40 score of 52%, while high-growth Pagaya Technologies PGY +0.46% ▲ has a score of 63%. Palantir’s extraordinarily high Rule of 40 score has often been cited by the company management in support of its premium valuation. In reality, though, Rule of 40 scores start to deteriorate as an enterprise software company scales.

Palantir’s revenue grew 70% year-over-year in Q4 FY2025. The adjusted operating margin came to 57%. Stellar revenue growth was the biggest driver of the Rule of 40 score. Despite this strong revenue growth, the company ended 2025 with just $4.48 billion in revenue. This reveals that Palantir is still a relatively small, young business compared to established enterprise software giants.

To compare, Adobe reported revenue of $23.77 billion for Fiscal 2025. Although Palantir can grow at high double-digit rates at this early stage, as the company scales, growth is likely to decelerate. According to Bain & Company data, while 40% of companies managed to beat the Rule of 40 in any given year, only 16% of them were able to repeat this performance over a five-year period. This is entirely because of the effect of large numbers. The market, however, seems to value Palantir as if revenue will grow at high double-digit rates indefinitely.

Operating Margins May Face Pressure

In addition to the possibility of a deceleration in revenue growth, I am concerned about a deterioration in adjusted operating margins. Palantir’s strong growth in 2025 was supported by a 109% year-over-year increase in commercial segment revenue. After years of focusing on government customers and defense contracts, Palantir has doubled down on its commercial business, targeting large-scale businesses.

Interestingly, despite acquiring 182 new U.S. commercial customers in 2025 with a year-over-year growth of 50%, Palantir’s sales and marketing expenses grew only 19%, accounting for just 23% of total revenue. This looks great on paper, but it also reveals that Palantir is winning new contracts from early adopters through its Artificial Intelligence Platform (AIP) Bootcamps. This strategy has helped Palantir keep the cost of new customer acquisition very low. For context, enterprise SaaS companies generally spend 40% of revenue on sales and marketing, on average.

Moving forward, Palantir is likely to be forced to target mid-tier U.S. commercial customers. Unlike early adopters such as large-scale U.S. businesses, these mid-tier businesses would require more convincing. AI Bootcamp conversion rates will naturally decline when this happens, prompting Palantir to spend more on new customer acquisition. Eventually, this will exert pressure on the company’s adjusted operating margin.

Is Palantir a Buy, According to Wall Street Analysts?

Based on the ratings of 20 Wall Street analysts, PLTR is a Moderate Buy. The average Palantir price target is $193.50, which implies upside of 28% from the current market price.

The sentiment among analysts has improved lately amid rising tensions in the Middle East, as Palantir has a strong government business. That said, I believe the company’s valuation already captures this upside, leaving almost no margin for execution error.

Takeaway

Palantir is firing on all cylinders. Although co-founder Peter Thiel is booking some of his gains, this decision seems to have stemmed from his broader stance on risky assets. While there seems to be no reason to worry about billionaire Thiel’s recent sales, the company’s expensive valuation leaves no margin of safety for investors today.

Given that a structural decline in Palantir’s Rule of 40 score is on the cards, its current valuation exposes investors to a possible valuation re-rating in the foreseeable future. For this reason, I am bearish on Palantir stock, although I believe the company will still grow at a healthy pace in the next five years.

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