Palantir surges as it deepens its ties to the federal government
Shares of the software firm, up over 300% this year, have become a favorite of retail traders.
Palantir is a top performer today, after announcing a new government security designation that would expand its ability to sell its cloud services to the US government. The designation, known as FedRAMP High Baseline, “enables the U.S. government to process the most sensitive unclassified workloads in Palantir’s cloud offering,” the company said in a statement.
Such bureaucratic updates typically wouldn’t be the stuff to get tech-stock traders super excited.
But the sales to government — particularly the prospect that the company could benefit from an incoming Trump administration with close ties to powerful right-wing tech billionaires Elon Musk and Peter Thiel, who is a cofounder of Palantir — are a huge part of the story that’s turned Palantir into a widely traded retail favorite over the last year.
On a raw dollar basis, the company’s sales to governments are larger and growing faster — $408 million in Q3, up 32.5% — than its commercial division, worth $317 million, up 26.4% in Q3 compared to the prior year. (Palantir’s US government business rose an even faster 40% in Q3, the company told analysts during a conference call.)
But sales are going to have to be genuinely massive to justify the valuations the stock market is putting on the company. In context, right now the collective wisdom of the world capital is putting a forward price-to-sales multiple on Palantir of an insane 45x.
To put that in perspective, here’s how Palantir’s current valuation compares with peak price-to-book multiples with some of the most notable and beloved tech companies in recent decades.
Seems like there’s some unrealistic enthusiasm baked into the price! But for now, Palantirians are enjoying their current status as kings of the S&P 500. Palantir’s more than 300% gain currently makes it the best-performing stock of the index this year — just ahead of Vistra — though it only joined the blue chip index in September.
