Palantir's Stock: Stock Split Hype vs. The Earnings Data

The chatter around Palantir Technologies has reached a fever pitch, but it’s not about their latest government contract or a breakthrough in their Artificial Intelligence Platform (AIP). Instead, the retail investing world is consumed by a far more cosmetic question: will they split their stock? After a year where giants like Nvidia and Broadcom sliced up their shares to wild applause, Palantir, with its stock price soaring past $200, seems like the logical next candidate.

The speculation isn't baseless. An analyst at RBC Capital recently noted that retail investors are "largely focused on the potential for a stock split." This is the kind of qualitative data point I find fascinating. It tells you nothing about the company's fundamentals, but everything about the market's psychology. A stock split is, in essence, financial theater. It changes nothing about a company's market capitalization or an investor's total equity. Owning one share at $200 is identical to owning ten shares at $20. And yet, the market consistently reacts as if the company has unlocked some new, intrinsic value.

This psychological quirk is powerful. Look at the data from last year's splits: in the window between announcing and executing, Nvidia jumped 121%, Broadcom 170%, and Chipotle 66%. The market, it seems, loves the illusion of affordability. A $200 stock feels exclusive and heavy; a $20 stock feels accessible, an invitation to the party. But as any seasoned analyst knows, paying a premium to attend a party doesn't guarantee you'll enjoy it. The real question isn't whether a split will happen, but whether the party is already dangerously overcrowded.

The Seduction of a Lower Price Tag

Let’s be clear about the mechanics. A stock split is like asking a cashier to break a $100 bill. You walk away with a thicker wallet—ten $10 bills, perhaps—but you are no wealthier. The maneuver is designed to increase liquidity and, more importantly, to appeal to a broader base of investors who might be psychologically deterred by a high-three-digit price tag. It’s a marketing tool, plain and simple.

And for a company like Palantir, which enjoys a cult-like following among retail traders, it’s an incredibly seductive tool. The stock is up over 330% in the last year—to be more exact, it has climbed from a 52-week low of $41.03 to its current perch above $200. That momentum creates a powerful feedback loop. The price runs up, which generates split speculation, which in turn attracts more momentum-chasing investors, further inflating the price.

I’ve seen this pattern play out dozens of times. The narrative takes hold, and the underlying numbers become a secondary concern. The problem with this kind of rally is that it’s built on sentiment, not substance. It works until it doesn’t. Consider the cautionary tale of Chipotle. Its post-announcement rally was impressive, but the euphoria eventually collided with the reality of stagnating growth. The stock is now down significantly from its post-split highs. The split provided a temporary lift, but gravity—in the form of financial fundamentals—always reasserts itself. Does Palantir have the fundamental velocity to escape that same gravitational pull?

A Brilliant Business at an Irrational Price

This brings us to the core discrepancy in the Palantir story. On one hand, you have an undeniably impressive business. Palantir is not some speculative, cash-burning AI startup. It’s profitable, a rarity in its field, and continues to post double-digit growth in both sales and earnings. Its strategy of embedding "forward-deployed engineers" with clients to create bespoke AI solutions is brilliant. It makes their product incredibly sticky (a key metric for any software firm) and justifies their premium pricing. Their deep entrenchment with the U.S. government provides a stable, if opaque, revenue base.

And this is the part of the analysis that I find genuinely puzzling. The business is strong, but the market’s valuation of that business has become completely detached from any recognizable financial framework. The stock currently trades at a price-to-earnings (P/E) ratio of more than 620.

Let that number sink in. A P/E of 620. That's not just high; it's astronomical. It’s a valuation that bakes in not just years, but decades of flawless execution and exponential growth. For context, Palantir would need to increase its earnings tenfold from current levels just to trade at a P/E of 62. Even then, its valuation relative to its earnings would be nearly double that of a cash-generating leviathan like Alphabet (the parent company of Google).

So, while the crowd is mesmerized by the possibility of a stock split, they are ignoring the flashing red light on the dashboard. The conversation has become entirely about the share price, not the enterprise value. At what point does a great company become a terrible investment? And how much of this valuation is predicated on a narrative of AI dominance that has yet to be fully proven in the commercial sector, where margins are thinner and competition is fiercer?

The Math Simply Doesn't Work

Ultimately, the stock split debate is a dangerous distraction. It’s a conversation about the wrapping paper on a box whose contents are priced for absolute perfection. My analysis suggests that whether Palantir splits its stock 2-for-1, 10-for-1, or not at all is utterly irrelevant to the long-term investment thesis. The defining characteristic of Palantir's stock today isn't its price, but its valuation. A great company and a great investment are two very different things. Right now, Palantir is a textbook example of the former, but its valuation makes it a perilous example of the latter. I would avoid it, split or no split. The numbers don't support the narrative.