Credit where it’s due: Palantir just put on a fireworks display for Wall Street. The data analytics darling didn’t just beat expectations for its second quarter — it blew them away, smashing through the $1 billion quarterly revenue milestone for the very first time.

The numbers are, frankly, staggering. Revenue growth accelerated to 48%. Growth in the U.S. market was a blistering 68%, driven by huge demand for its Artificial Intelligence Platform (AIP) from both the private sector and the government. The company booked $2.27 billion in new contracts, a 140% increase that shows a pipeline brimming with future business. 

The market, of course, loved it, sending the already high-flying stock up another 8%. Having already been the top performer in the S&P 500 last year, it’s holding onto that title year-to-date.

It’s an incredible story. But as with any incredible story, you have to ask: is it too good to be true?

Let’s add some context. It took Palantir 22 years to reach this billion-dollar-quarter milestone. For comparison, the members of the “Magnificent Seven” all got there much faster. 

Now, that’s not a fatal flaw. Palantir started with a very different, complex business model focused on intelligence agencies, which is a harder business to scale than, say, a search engine or an e-commerce platform. Its recent explosion in growth is a new phenomenon, tied directly to the launch of its AIP in 2023.

The real conundrum isn’t the time it took to get here, though: it’s the price tag the market has slapped on it now that it’s arrived. This is the part that should make any prudent investor pause.

With a market cap approaching $420 billion, Palantir’s valuation is in the stratosphere. We can measure this with the price-to-sales (P/S) ratio, which tells us how much we’re paying for every dollar of the company’s revenue. Palantir’s is reported to be over 130. 

To be clear, that is an astronomical figure, making it vastly more expensive than any of the Magnificent Seven when they first crossed the same revenue threshold. By that metric, it may be the most expensive stock in the entire S&P 500.

That’s what I mean by that cover charge. You can get into the club, but the price at the door is breathtaking. You’re paying for decades of flawless execution and uninterrupted, hyper-speed growth.

There’s no doubt the business is firing on all cylinders. The company raised its guidance for the year, and its recent federal contracts show that the current administration has fully embraced its platform to enhance government operations. The momentum is undeniable.

But a great company and a great stock are two different things. The question isn’t whether Palantir is a good business — the recent quarter proves it is. The question is whether the stock, at this price, can deliver a good return. A valuation this high leaves absolutely no room for error. Any hiccup, any sign of slowing growth, and the fall could be painful. 

The law of financial gravity is patient, but it’s undefeated. For Palantir, the business is a success story, but the stock’s valuation is a tightrope walk.

And of course timing is everything. We were in Palantir below $10 in my GameChangers portfolio.

It only takes one stock like that to transform lives. Where do we go from here? Find out!