Palantir (NASDAQ: PLTR) has been one of the hottest AI stocks since 2023. However, 2026 hasn’t been so kind to it. Even after a sharp spike last week that was apparently connected to an improving outlook for other defense contractors, it’s down 12% so far this year. That begs the question: Is this a buying opportunity or the start of a major sell-off?

I think it’s helpful to project Palantir’s stock price by the end of next year to determine whether it is a buy right now.

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Palantir is a direct application of AI

Palantir has long used AI to support its data analytics services, but it’s now fully integrating AI across workflows and across various parts of its clients’ businesses to foster an AI-first mindset. This has led to unreal growth: Palantir’s latest quarterly results featured 85% revenue growth. That’s impressive, but the big question is how long that can last?

Palantir’s revenue growth has consistently accelerated over the last few years,

For investors, looking at Palantir’s guidance isn’t always helpful, as management is consistently too conservative in its predictions, which isn’t a bad thing. Wall Street analysts estimate that Palantir’s growth rate will moderate slightly in Q2 to 80%. In Q3, they foresee further deceleration to 69% growth. Those are still solid figures, but are they enough to justify the stock’s current price tag?

For 2026 and 2027, analysts project 73% and 45% growth, respectively. In 2027, they estimate its earnings per share will be $2.07. That means at today’s current stock price, it trades for about 76 times 2027 earnings.

That’s a very expensive price tag for a company that’s growing at about a 45% pace. There are several companies growing as fast as Palantir that trade at far lower earnings multiples, so I’m a bit wary of investing in Palantir.

A more reasonable price-to-earnings ratio would be about 50 times trailing earnings once 2027 is over. Should Palantir achieve the $2.07 in earnings per share that Wall Street predicts, the stock would trade at $103.50. That would be about a 51% decline from today’s levels, so I don’t think this is a buying opportunity. In fact, Palantir has more room to decline before it’s properly priced for its growth rates and earnings.

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Keithen Drury has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Palantir Technologies. The Motley Fool has a disclosure policy.

Prediction: This Will Be Palantir’s Stock Price by the End of 2027 was originally published by The Motley Fool