When Should You Buy Palantir Stock? Here’s the Magic Number.

Artificial intelligence predicts that Palantir Technologies (NYSE:PLTR) stock will move higher. Plus, a well-known fund manager likes Palantir Technologies’ future prospects.

However, you have to make your own financial decisions If you’re a value-focused investor, then you’ll probably want to wait before taking a share position in Palantir Technologies.

Headquartered in Colorado, Palantir Technologies is provides a range of security products and services. The company is also involved in AI, and of course that was a red-hot market during 2023’s first half.

Just bear in mind, however, that a red-hot industry can quickly turn ice-cold. In any event, let’s see if we can identify an investment strategy for people who believe in Palantir Technologies for the long term.

AI and Cathie Wood Pick PLTR Stock

Plenty of traders want to invest in AI, but have you considered letting AI pick prime stocks for you? I suspect that using machine learning as a stock-picking tool will be a major theme in the coming months.

To that end, AI predicts that PLTR stock will deliver triple-digit returns in 2029, or possibly even next year. These results are certainly possible as Palantir Technologies’ cybersecurity-focused Foundry platform is popular among government entities and private businesses.

Furthermore, ARK Investment Management CEO Cathie Wood is reportedly betting on Palantir Technologies. Wood favors high-growth technology names, so it’s not a surprise that she would pick Palantir.

Palantir Technologies Gains Value on AI Hype

It’s possible that Wood and AI chose PLTR stock because Palantir Technologies leverages AI and large language models in its software.

After all, Palantir’s management claimed that the company is “a worldwide leader in Artificial Intelligence” in its first-quarter 2023 business update.

Also, Palantir Technologies CEO Alexander C. Karp touted the company’s “new Artificial Intelligence Platform (AIP)” in Palantir’s first-quarter 2023 earnings report. Yet, the enthusiasm surrounding AI seems to have over inflated Palantir Technologies’ market value.

Bear in mind, PLTR stock doubled in price in May and June, shooting from $7.50 to $15. Thus, it’s reasonable to conclude that financial traders have already baked Palantir’s AI connection into the cake.

One quarter after another, Palantir Technologies has only been profitable on a per-share basis by a few pennies at most. We’re not talking about blockbuster profits here. There are serious valuation concerns with Palantir.

Reportedly, Palantir Technologies’ GAAP forward price-to-earnings (P/E) ratio is a whopping 312.36x.

This is what can happen when the market really likes a company even though it’s not very profitable on a per-share basis. Just for comparison, the sector median GAAP forward P/E ratio is 25.1x.

PLTR Stock Looks Due for a Dip

It’s fine that Wood and AI favor Palantir Technologies as a business with powerful growth potential. However, it appears that the market has already pumped the share price up too much.

If you’re in the market for an investment that offers both growth and value, keep an eye on Palantir Technologies.

Wait patiently for PLTR stock to pull back to $12. Then, go ahead and make your move as Palantir will still be a high-conviction pick, but will also be more reasonably valued.

On the date of publication, David Moadel did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.