Palantir faces dilution risk warning

A top investor warns that Palantir’s valuation may be inflated by dilution even as the company delivers growth.

Palantir Stock Faces Scrutiny Over Dilution and High Valuation

Palantir diluted about 148 million shares in the past year, lifting the diluted share count to 2.56 billion and adding roughly $28 billion in market value while the company is forecast to generate about $4.15 billion in revenue this year. This created a gap between the stock’s price and the underlying earnings power that some investors say may be unsustainable.

In a caveat that drew attention from market watchers, Stone Fox Capital argues that Palantir trades at more than 100 times sales, a level they describe as dangerously optimistic given the trajectory of revenue growth. The firm notes Palantir posted 48% revenue growth in the latest quarter to just over $1 billion, with U.S. commercial sales up 93% but totaling only $306 million for the quarter. While the stock has risen about 1,870% over five years, revenue grew 244% in the same period, suggesting the market may be pricing future gains more aggressively than current results justify. Wall Street remains cautiously positioned, with a neutral Hold consensus and a target near $155, implying potential downside in the year ahead.

This story highlights a widening tension between hype around AI driven growth and the hard math of business economics. Dilution can dilute value just as much as it expands it, especially if a company relies on stock-based incentives to attract talent. Palantir’s path to scale could be slower than investors expect, lowering per-share growth even if headline revenues rise. The market’s willingness to pay for future optionality matters, but so does governance that aligns management incentives with long-term returns for shareholders.

Highlights

The Palantir narrative is still trying to balance hype with fundamentals.