Charles Dickens opened his novel A Tale of Two Cities with a classic line, "It was the best of times; it was the worst of times." Last week was downright Dickensian for Palantir Technologies (PLTR +1.25%).
The artificial intelligence (AI) software company reported mind-boggling four-quarter results following the market close on Monday, Feb. 2, 2026. By the end of the week, though, Palantir's stock was down roughly 8%. A whopping $28 billion in market cap evaporated.
Investors now have a key question to answer: Should you buy Palantir stock hand over fist after its steep sell-off?
NASDAQ: PLTR
Key Data Points
The bull case: Palantir continues to fire on all cylinders
I think the bull case for Palantir is obvious. The company continues to fire on all cylinders. Its Q4 update seemed to indisputably confirm this premise.
Palantir reported total year-over-year revenue growth of 70% in Q4. Revenue jumped 19% sequentially. While growth was across the board, the U.S. commercial segment stood out, with revenue soaring 137% year over year.
The company closed 61 deals of at least $10 million in its recent quarter. It closed 180 deals of at least $1 million. Palantir's customer count increased 34% year over year.
What about the bottom line? Palantir's earnings skyrocketed 7.7x year over year to $608.7 million. The AI software leader's Q4 adjusted earnings per share (EPS) of $0.25 easily beat the Wall Street consensus EPS estimate of $0.23.
Palantir's future also looks bright. The company's guidance for 2026 projects year-over-year revenue growth of 61%. Chief Revenue Officer Ryan Taylor said in the Q4 earnings call, "We're entering 2026 with an extremely strong footing. Everything we've built over two decades is converging into this moment, and we're charging into the year with unmatched conviction as the defining enterprise software company of this generation."
Image source: Getty Images.
The bear case: Palantir's stock is still priced for perfection
On the other hand, I think there's an obvious bear case for Palantir as well. Even after the recent decline, the AI stock is still priced for perfection.
The company's shares trade at 125 times forward earnings. Some might argue that Palantir's tremendous growth justifies this valuation. However, the stock's price-to-earnings-to-growth (PEG) ratio, which incorporates analysts' five-year earnings growth projections, is a lofty 3.6.
It's not surprising that many on Wall Street are skeptical that Palantir's momentum over the last 12 months is sustainable. Less than half of the analysts surveyed by S&P Global (SPGI 2.15%) in February who cover Palantir recommended buying the stock.
Some could also argue that Palantir isn't truly firing on all cylinders. The company's international commercial revenue increased by only 8% year over year in Q4. CEO Alex Karp admitted in the Q4 earnings call, "[W]e really don't have the bandwidth to do anything that's difficult outside of America."
Palantir faces a staffing issue that's preventing it from capitalizing on opportunities outside the U.S. Granted, the company is trying to hire more talented professionals. However, Karp hinted at a significant issue in the Q4 update, stating, "We don't do acquisitions because we are a thick, dense culture, which means you'd have to fit in."
To buy or not to buy?
Let's return to our original question: should investors buy Palantir stock hand over fist after its recent sell-off? I think the answer to that question will be different for different investors.
Investing in Palantir requires that you believe one of two things. You either expect the company will grow so rapidly that its valuation metrics become more attractive, or you simply don't think conventional valuation metrics matter for a company that refers to itself as "an n of 1." It's possible, though, for investors to like Palantir's business model and expect robust growth -- but not enough growth to justify its premium price.
I'm in the latter camp. As Benjamin Graham wrote, "In the short run, the market is a voting machine, but in the long run, it is a weighing machine." I'm not convinced that Palantir's growth will weigh in enough.
