TL;DR
Palantir’s 690 P/E ratio isn’t a sign of genius; it’s a warning sign. This unsustainable valuation is a gamble on future earnings, echoing past market crashes. Don’t let hype cloud your judgment.
Story
Palantir’s sky-high P/E ratio of 690? It’s not a sign of future success; it’s a monument to blind faith. 1
Imagine a house of cards, impossibly tall. That’s Palantir’s valuation. Each card represents a future profit, and one bad quarter (a missing card) could bring the whole thing crashing down. The current price implies they need to repeat their current profits for generations—a bet few can afford. This isn’t investing; it’s a gamble on your descendants’ financial well-being. Like the dot-com bubble or the 2008 housing crisis, this kind of irrational exuberance often ends badly.2
Individual investors, seduced by the promise of quick riches, are pouring money into the company, regardless of the unsustainable valuation. Stories abound about people betting their retirement savings or even their life savings on Palantir stock.3
The lessons? The market can remain irrational far longer than you can remain solvent.4 Remember the Enron scandal? Or WorldCom? Always look past the hype. Don’t confuse a high stock price with actual value. Scrutinize the fundamentals, not the headlines. Diversification is vital. Never invest more than you can afford to lose. If something seems too good to be true, it probably is.
Palantir’s stock price might continue to climb for a while. But history teaches us that unsustainable growth always ends in tears—the higher the climb, the harder the fall.5
Advice
Never invest based on hype alone. Diversify. Understand the fundamentals. Don’t bet your retirement on a company with an unsustainable valuation.
Source
https://www.reddit.com/r/investing/comments/1mblry6/palantirs_690_pe_ratio_is_not_a_bull_case_its_a/