Why I Sold My Palantir Shares: A Deep Dive into Valuation and Market Rationality
Key Points:
Palantir is a strong company, but its current market price appears disconnected from its fundamental value.
Using the Peter Lynch fair value model, the Forecaster Terminal identifies a massive overvaluation.
A rational investment strategy sometimes requires selling even high-potential stocks when valuations become extreme.
When Great Companies Become Bad Investments
Palantir is, by many accounts, a great company: it has visionary leadership, fast-growing revenues, and a compelling narrative. But sometimes, even the best companies can become overhyped—and overvalued.
In this article, I share why I made the bold move to sell all my Palantir shares, despite being a long-time believer in its future. This wasn’t a decision made lightly. It came from rigorous analysis, powered by our Forecaster Terminal, and grounded in the timeless principles of fundamental investing.
The Math Behind the Move
Let’s go straight to the numbers. Palantir’s stock price at the time of the sale was $132, while the fair value calculated by the Forecaster Terminal was just $22. That’s a 6x overvaluation—and this isn’t a guess. It’s based on a method made famous by legendary investor Peter Lynch.
According to Lynch, a fairly valued stock should have a P/E ratio roughly equal to its earnings growth rate. In Palantir’s case, its P/E is over 550, while even our generous growth projection—123% per year—doesn’t come close to justifying it.
In fact, to support a price of $132, Palantir would need to generate $340 billion in net income. Today, it earns around $462 million. For context, even Apple, the world’s most profitable company, makes $93 billion. Nvidia makes $72 billion. For Palantir to catch up? It’s not just unlikely—it’s nearly impossible under current conditions.
Forecaster Isn’t a Black Box. It’s a Lens.
This is where the Forecaster Terminal proves its value. It’s not just another tool throwing out price targets—it shows you how a valuation is built.
It calculates fair value by multiplying the latest earnings with a statistically derived growth rate (using regression).
It gives transparency: you can see the earnings inputs, the share count, and the growth assumption.
It helps you stay rational in the face of hype.
That’s what happened here. I didn’t sell Palantir because I stopped believing in the company. I sold because the data said: “this is not sustainable.”
A Case of Contrast: Oddity vs. Palantir
In the same portfolio, I recently added a company called Oddity. It’s the exact opposite of Palantir: fast-growing, but undervalued by 83% according to our fair value model. At the time of purchase, its fair value was estimated at $141 while it was trading at $76.
This is the kind of setup that Peter Lynch would call a bargain—a company whose valuation lags behind its true potential. Palantir, in contrast, is priced for perfection and beyond.
Even Palantir Knows It’s Overpriced
Interestingly, even Palantir’s management seems to be aware of this. For years, the company issued new shares each quarter, diluting existing shareholders. Recently, they announced the beginning of a buyback program—a sign that they believe the stock is too expensive to keep issuing new shares.
But they haven’t started buying yet. Why? Possibly because even they expect the stock to drop before initiating repurchases.
Conclusion: Stay Rational in an Irrational Market
Selling Palantir wasn’t an emotional decision. It was a rational one, backed by data and grounded in proven investing principles. The market may keep pushing prices up in the short term, but valuation always matters in the long run.
