Palantir Upgrade Highlights Growth but DeepValue Warns on Valuation and Sustainability

What happened

Seeking Alpha upgraded Palantir to Buy after a 30% share price decline, citing robust Q4 2025 results with revenue up 70% YoY and EPS up 79%. The upgrade emphasizes expanding gross margins near 85%, a 143% surge in Remaining Performance Obligations (RPO), and new strategic partnerships as signs of durable revenue momentum. However, the latest DeepValue master report maintains a 'WAIT' rating, noting that at $135.65, Palantir's P/E of 199x and EV/EBITDA of 214x price in sustained hyper-growth without a margin of safety. Key risks from the report include high stock-based compensation ($684M in 2025), $2B in noncancelable cloud commitments, and contracts that are often terminable for convenience, which could compress margins if growth slows. This contrast underscores that while recent performance is strong, the investment thesis hinges on whether metrics like net dollar retention (139% in Q4) and quarterly total contract value bookings (over $3B) can be sustained in the coming quarters.

Implication

The Seeking Alpha upgrade may attract buyers looking for a bounce after the price drop, but it doesn't address the fundamental valuation concerns raised in the DeepValue report. For a bullish case to hold, Palantir must maintain net dollar retention above 130% and quarterly TCV bookings over $3B, as outlined in the report's conditions for upgrading. Downside risks include potential deceleration in U.S. commercial growth below 70% YoY or NDR falling under 120%, which could trigger significant multiple compression. Investors should monitor the next 1-2 quarters closely, particularly Q1 2026 revenue against guidance and early warning indicators like partner-sourced deals and gross margin trends. Ultimately, the implication is that patience is warranted; entering at current levels carries high risk unless clear evidence emerges that the AI-led momentum is converting into stable, profitable growth.

Thesis delta

The Seeking Alpha upgrade introduces a more optimistic near-term view based on recent earnings beats and valuation appeal after the drop, but it does not alter the core thesis from DeepValue. DeepValue's 'WAIT' stance remains unchanged, as the upgrade lacks new data on sustainability; the thesis shift would only occur if Palantir demonstrates consistent performance against key metrics like NDR and TCV bookings over multiple quarters.