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👉 The Stock Market is Losing Touch With Reality: What Should You Be Doing? 🤔
👉 Palantir Technologies (PLTR): A Deep Dive into Its Valuation and Potential 📈
👉 Beehiiv: Start Monetizing Your Passions From Home ✍
“The longer you can extend your time horizon the less competitive the game becomes, because most of the world is engaged over a very short time frame.”
The Stock Market Is Losing Touch With Reality
There have been multiple indications that the U.S. economy is slowing over the past few weeks. However, Wall Street keeps chugging along.
Bullish camps claim that a slowing economy is actually good news, as it may cause the Fed to cut interest rates.
But as we all know, rate cuts have been a hard thing to come by, and it may be a good time to start looking at alternatives for our investments.
One way to judge investor confidence is the price to sales ratio (P/S). A lower ratio suggests that investors are being cautious about a businesses future growth, and a higher ratio suggests that investors are optimistic about the future growth.
Right now, investors hopes are astronomical. The average P/S ratio in the S&P 500 sits at about 3.3x. Just a few years ago, this ratio was less than 2.
If stocks in the S&P were to fall to those levels again, the market would lose ~33% of its value.
The driving force for this incredible expansion? Enthusiasm around AI.
Major AI companies, including those in the Magnificent 7, are spending hundreds of billions of dollars into all things AI.
“This investment surge accounts for about half of U.S. economic growth in the first half of 2025,”
It truly is remarkable.
There are 3 reasons to remain cautious as an investor as we continue into the end of 2025:
Current stock prices incorporate a lot of optimism. As we know, stock prices are forward looking and a lot of the expected growth is already priced in.
There is minimal evidence of the broad increase in real-world productivity (yet).
Even if AI delivers, it’s unlikely that everyone will be a winner in the space. Very possible that only a handful of companies are market leaders.
What Should You Do?
Consider diversifying your portfolio with dividend stocks, if you’re already growth focused.
We don’t know how long this bubble will remain, but it’s sure to pop eventually.
Hedge yourself by adding blue chip dividend stocks or dividend ETFs as a margin of safety and some downside protection.
I’ve said it from the beginning, but a well-balanced portfolio includes both dividends and growth stocks, those together are what give you your total return.
Learn from this investor’s $100m mistake
In 2010, a Grammy-winning artist passed on investing $200K in an emerging real estate disruptor. That stake could be worth $100+ million today.
One year later, another real estate disruptor, Zillow, went public. This time, everyday investors had regrets, missing pre-IPO gains.
Now, a new real estate innovator, Pacaso – founded by a former Zillow exec – is disrupting a $1.3T market. And unlike the others, you can invest in Pacaso as a private company.
Pacaso’s co-ownership model has generated $1B+ in luxury home sales and service fees, earned $110M+ in gross profits to date, and received backing from the same VCs behind Uber, Venmo, and eBay. They even reserved the Nasdaq ticker PCSO.
Paid advertisement for Pacaso’s Regulation A offering. Read the offering circular at invest.pacaso.com. Reserving a ticker symbol is not a guarantee that the company will go public. Listing on the NASDAQ is subject to approvals.
Palantir Technologies (PLTR): A Deep Dive into Its Valuation and Potential
As of time of writing, Palantir $PLTR ( ▼ 9.54% ) is trading at ~$172/share, with a market cap of about $409 billion.
The company recently reported Q2 earnings, here were the results:
EPS: $0.16 vs. $0.12 expected (BEAT ✅)
Revenue: $1B vs. $937.45M expected (BEAT ✅)
Commercial: Up 93% to $306 million.
Government: Up 53% to $426 million.
Total U.S.: Up 68% to $733 million, comprising 73% of the total business.
Palantir recorded a record $1 billion in revenue this quarter, which caused the stock to skyrocket, but it still trades at a TTM P/E ratio of around 700 and a P/S ratio of about 130.
These numbers alone raise the question: is Palantir a buy or a sell?
Let’s find out below.
Current Stock Price and Key Financial Metrics 💵
Palantir’s stock sits at $172/share (as of time of writing) with a 52-week range of $25.57 to $176.33… volatility at its finest.
Below are key financial metrics as of August 5, 2025:
For context, typical P/S ratios for software companies range from 5-10. Palantir’s P/S of 140 and P/E of 700 suggest that investors are pricing in exceptional future growth.
Company Fundamentals 📊
Palantir specializes in AI-driven data analytics, offering platforms like Gotham, Foundry, Apollo, and its Artificial Intelligence Platform (AIP).
These platforms serve government and commercial clients, allowing for data integration and actionable insights.
The company’s Q2 2025 earnings reported $1 billion in revenue, a 48% year-over-year increase, with U.S. commercial revenue growing by 93%.
Here’s the time it took Palantir to reach $1 billion in quarterly revenue, compared to the Magnificent 7.
Earnings per share (EPS) reached $0.16, surpassing the estimate of $0.14, up 77% from the prior year.
Projections 📽
Analysts project revenue to reach approximately $5.58 billion in 2026, implying a forward P/S ratio of about 81, still much higher than industry norms.
Palantir achieved a high Net Dollar Retention (NDR) rate of 128% for the most recent quarter (Q2 2025), signifying that existing customers are spending significantly more over time. The 128% rate means that current customers increased their spending by 28% on average.
Additionally, long-term government contracts, such as a $1.3 billion U.S. Army deal, help its long term sustainability. However Palantir’s reliance on government contracts poses a risk, as changes in policy or spending could impact future revenues.
Valuation: Justified or Overextended? 🤔
Bullish Perspective 📈
The argument for the bullish camp is that Palantir’s valuation is justified based on its unique position in the AI application stage and its potential to become a giant in the space.
If Palantir achieves $90 billion in revenue with a 40.3% CAGR, supported by its revenue growth and commercial growth in Q2 2025, then some analysts believe this company could reach a $1 trillion market cap.
Its high retention rates and operational leverage, with free cash flow margins expected to exceed 40%, further support the bullish case.
Bearish Perspective 📉
On the flip side, the bearish camp argues that the companies valuation is unsustainable, citing that its reliance on unpredictable government contracts add a lot of risk for investors.
The stock could see a sharp correction if growth slows down as a result of its market cap and 81x forward sales, trading much higher than its competitors.
Analyst Ratings ⭐
Analyst price targets highlight this great divide.
As of August 5, 2025, 20 analysts rated Palantir a “HOLD”, with an average 12-month price target of $140.45.
Price targets range from $45 (RBC Capital) to $200 (Wedbush).
Risks and Considerations 😃 😥
Palantir’s high valuation leaves little room for error.
Any slowdown in revenue growth, failure to meet expectations, or increased competition could trigger a significant correction.
The company’s reliance on government contracts, while considered a strength, poses risks due to potential policy shifts.
Also, any changes in macroeconomic factors, such as interest rates or geopolitical developments, could impact investor sentiment towards “high-growth” tech stocks.
Recommendation 🫡
Palantir has had quite the run year to date, however its overextended valuation metrics (P/E, forward P/E, and P/S) are among some of the highest in the sector.
The analyst consensus is “HOLD”, suggesting that the stock may be overvalued at current levels.
What does this mean for you?
It means sitting on the sidelines and waiting for a more attractive entry point, or maybe to explore other alternative investments with better risk-reward profiles.
Trimming existing positions could be a cautious strategy given the high likelihood of a correction.
See you in the next one!
Credit card debt reaches $1.21 trillion
Nothing could go wrong, right?
— #THE DIVIDEND DOMINATOR (#@TheAlphaThought)
12:16 PM • Aug 7, 2025
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