After a 2400% surge, analysts warn that Palantir (PLTR.US) may be a "waste of time" in the next 5 years.

Since 2023, Palantir's stock price has surged from $6 to $150, an increase of 2400%, creating an investment myth. Now standing at $150, many investors are asking: is Palantir still worth investing in? The Motley Fool analyst warns that Palantir's stock price has been severely overvalued, and investors in the stock may be in for a disappointment in the next five years. Accelerated performance growth Palantir is one of the biggest beneficiaries of the AI boom, with its software being a preferred choice for deploying AI technology in government and business sectors. Palantir initially designed products for the government, but later expanded into the business sector and achieved similar success. The core idea of Palantir's products is to gather multiple streams of data, use AI to process this information, and convey the analytical results to decision-makers. This enables decision-makers to make informed decisions in real-time. Palantir also offers some products that can deploy AI agents throughout the entire enterprise, automating tasks traditionally done by humans. It is evident that this product can recoup costs in the short term by enhancing business execution and reducing operational costs. The product portfolio has enabled Palantir to achieve remarkable growth in the past few years, with record growth rates in the second quarter. In the second quarter, Palantir's commercial revenue increased by 47% year-on-year, reaching $4.51 billion. The way US businesses adopt AI differs from international businesses, resulting in a much higher growth rate for US operations. US commercial revenue grew by a whopping 93% year-on-year, indicating the potential for significant growth if international businesses deploy Palantir's technology at a similar rate. Both domestic and international government business revenues performed strongly, growing by 49% to reach $5.53 billion. Palantir has clearly been successful in its business and still has significant growth potential, but how will all this affect the company's stock price? Overvalued valuation overshadows the future Any investment theory consists of two parts: expected revenue growth and the current stock price. Even if a company is expected to double its revenue every year for the next ten years, if the buying price is too high, the stock may still be a poor investment. The Motley Fool analyst Keithen Drury believes that Palantir falls into this category, as its stock price is unbelievably high. Palantir's price-to-sales ratio is as high as 115 times, and the expected price-to-earnings ratio is 244 times. Few companies can reach such high valuation levels. Palantir's stock price already reflects most of its growth potential. Assuming that Palantir's revenue continues to grow at a compound annual growth rate (CAGR) of 50% for the next five years, with a profit margin of 35% and no change in the number of shares. This is a very optimistic assumption, as achieving a 50% growth rate for five consecutive years is a challenging feat for most companies. In addition, Wall Street analysts predict that Palantir's revenue growth rate next year will reach 35%, far lower than the growth rate set above. Palantir also experienced significant dilution of shareholder equity, with its number of shares increasing by 4.6% in the past year. But even without considering how optimistic these forecasts are, Palantir's stock is still unlikely to bring returns to investors. If Palantir were to achieve all of the above targets, its revenue would reach $26.1 billion, significantly higher than the current total revenue of $3.3 billion. With a profit margin of 35%, Palantir's profit would reach $9.1 billion. Based on the current market value and an expected P/E ratio of about 41 times, Palantir's stock price should currently be at this level. Therefore, Drury believes that Palantir's stock price will remain unchanged or decline in the next five years. Palantir's current valuation is based on unrealistic expectations. Palantir's stock is too expensive, limiting its future upside potential. In conclusion, Palantir's stock price seems to be severely overvalued.