Shares of Palantir (NASDAQ: PLTR) were flying this week. The company's stock gained 39.3% as of 1:50 p.m. ET on Friday, and was up as much as 41% earlier in the week. The leap comes as the S&P 500 (SNPINDEX: ^GSPC) was flat, while the Nasdaq-100 gained 0.4% in the week's trading.
The artificial intelligence (AI)-powered intelligence and analytics company reported better-than-expected earnings this week, sending shares higher.
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Palantir saw its Q4 sales grow 34% year over year and 14% quarter over quarter, delivering earnings of $0.14 per share on $828 million in sales. The numbers handily beat Wall Street's targets of $0.11 per share and $776 million. The company's guidance also topped estimates: Palantir expects sales of $3.75 billion for 2025 when consensus estimates were $3.52 billion.
Never one to shy away from a bold statement, CEO Alex Karp said of Palantir's performance, "Our business results continue to astound, demonstrating our deepening position at the center of the AI revolution." He drove home the point that Palantir saw the potential of large language models (LLMs) earlier than most, helping the company commercialize the technology better than many of its competitors.
While the company's growth is impressive and its potential is clear, the stock isn't without risk. Valuation metrics aren't everything and can even be misleading, but Palantir's is so high that it demands attention. The company's price-to-earnings ratio (P/E) is currently 585 -- an extremely high figure.
I don't want to downplay the company's real value and performance, but the truth is, there is a lot of hype surrounding the company. Given that hype and its sky-high valuation, any signs of weakness or slowing growth moving forward could spell trouble for its share price.
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Johnny Rice has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Palantir Technologies. The Motley Fool has a disclosure policy.