<div id="readability-page-1"><div> <h2>Key Points</h2><ul><li>Palantir's stock has fallen 29% from its peak, but it still carries a premium valuation for a software stock. </li><li>Its share price growth has outpaced its fundamental business performance. </li><li>If shares fall back to the long-term average for software companies, the stock may be down 80% a few years from now. </li><li>10 stocks we like better than Palantir Technologies ›</li></ul>Palantir Technologies (NASDAQ: PLTR) stock is off 29% from its all-time high. Investors may be underrating the odds of it falling even further.Will AI create the world's first trillionaire? Our team just released a report on the one little-known company, called an &#34;Indispensable Monopoly&#34; providing the critical technology Nvidia and Intel both need. Continue »The software and artificial intelligence (AI) provider is growing its top line quickly but still trades at an objectively high valuation multiple relative to the broader market, posing a significant headwind to further stock price appreciation. That could be a natural obstacle for any investor thinking about buying in today.If Palantir's valuation normalized to where its peer group trades, it would fall by another 80% -- and my prediction is that it will. Here's why.<h2>Fast growth, even faster stock price appreciation</h2>Palantir's revenue is up 119% over the last three years, and it grew 70% year over year last quarter, one of its fastest growth rates ever. The United States government and large commercial enterprises are rapidly signing new deals for Palantir's AI analytics platform, which can build custom solutions for data analysis across sprawling organizations, acting as a central intelligence layer.At the same time, Palantir now has profit margins that are among the highest in the software market, with a generally accepted accounting principles (GAAP) profit margin of 41% in Q4 2025. It's unlikely to significantly expand its margins from here, but it is highly impressive how fast operating leverage has materialized for a software provider that was unprofitable just a few years ago.The stock price, though, has grown much faster than the underlying business. Palantir's stock is up 1,580% over the last three years -- more than 10 times its revenue growth. This has led its price-to-sales ratio (P/S) -- market cap divided by trailing-12-month sales -- to grow to 85, up from well under 20 three years ago. This is by far the highest P/S ratio among large-cap software providers on the market today.<h2>Why Palantir could fall 80% from here</h2>Highly profitable software companies usually trade at P/S ratios of around 10. Even if Palantir keeps up its impressive growth, the stock could slide by 80%, assuming the P/S ratio reverts toward that norm.Let's do some quick math to illustrate. Palantir's trailing-12-month revenue is $4.475 billion. Given its current growth rate and backlog, its top line could plausibly grow to $10 billion within a few years. At a P/S ratio of 10, a company with annual revenues of $10 billion would have a market cap of $100 billion.Right now, Palantir's market cap is $353 billion. An 80% slide from there would yield a market cap of about $70.6 billion, which is below $100 billion. However, investors need to consider shareholder dilution -- which is something Palantir has a history of engaging in. The number of shares outstanding has climbed by 28% over the last five years. That could be another headwind for its share price in the future.If this level of dilution continues, Palantir's share price would draw down by roughly 80% even if it has a market cap of $100 billion a few years from now. This makes the stock incredibly risky to buy today, and one that is likely to disappoint investors going forward.<h2>Should you buy stock in Palantir Technologies right now?</h2> Before you buy stock in Palantir Technologies, consider this: The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Palantir Technologies wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years. Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you’d have $511,411!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $1,238,736!* Now, it’s worth noting Stock Advisor’s total average return is 986% — a market-crushing outperformance compared to 199% for the S&amp;P 500. Don't miss the latest top 10 list, available with Stock Advisor, and join an investing community built by individual investors for individual investors. See the 10 stocks » *Stock Advisor returns as of April 22, 2026. The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc. </div></div>

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Palantir's stock has dropped 29% from its peak, yet it remains overvalued compared to its peers. Despite impressive revenue growth of 119% over three years, the stock price has surged 1,580%, leading to a price-to-sales ratio of 85. Analysts predict that if the valuation normalizes, the stock could fall by 80%, potentially bringing its market cap down to around $70.6 billion. Concerns about shareholder dilution further complicate the investment outlook, making it a risky buy at present.

- Palantir's stock has decreased 29% from its peak but remains highly valued compared to its market peers.  
- While its revenue has grown rapidly, the stock's price increase has outpaced business performance, leading to an inflated price-to-sales ratio that could contribute to an 80% decline if valuations normalize.  
- Analysts suggest that continued shareholder dilution and high valuation create significant risks for investors considering buying Palantir Technologies at this time.

Prediction: Palantir Stock Could Fall 80% Further