Palantir (PLTR) — Great Product, Greater Expectations: A Clear, Data-Driven DCF Read

오리 오리
Oct 17
3 min read

Executive Summary

Palantir sits at the center of enterprise AI adoption, combining sticky government contracts with a rapidly scaling commercial platform. I built a five-year DCF grounded in audited FY2024 revenue and explicit assumptions for growth, free-cash-flow (FCF) margins, discount rate, and terminal growth. The model’s fair-value range lands at ~$10–$26 per share across conservative, base, and bull scenarios—well below the current market price—implying that investors are already pricing in years of hyper-growth and premium margins. The bull case can still work, but the execution bar is high and persistent.

Why This Company Matters

Palantir’s edge is operational: it doesn’t stop at dashboards. Its platforms turn messy, sensitive data into live decisions embedded in workflows for both governments and enterprises. That dual engine—durable public-sector spend plus accelerating enterprise uptake (AIP)—gives the story unusual longevity. When those two cycles run together, revenue visibility improves and cash generation can scale fast.

What Actually Changed (Qualitatively)

Over the past year, AIP pilots increasingly converted into multi-workflow rollouts, while the public sector continued to prioritize decision software. That twin tailwind sharpened the growth narrative and expanded the set of use-cases that justify budget. In plain English: more customers are moving from “cool demo” to “daily system,” and more agencies are treating Palantir as infrastructure rather than a one-off tool.

Modeling Approach (Simple, Falsifiable, and Transparent)

I used a five-year DCF with a Gordon terminal step. The starting point is FY2024 reported revenue. The four levers you can actually underwrite are: (1) revenue growth, (2) FCF margin ramp, (3) discount rate (WACC), and (4) terminal growth (g). I avoid heroic “forever” assumptions; instead, I show how value moves when you turn those four knobs. The model also adds net cash to enterprise value to arrive at equity value per share.

Core Assumptions (Base Case)

Growth: +30%, +25%, +20%, +15%, +12% over the next five fiscal years (fast early, slowing on a larger base).
FCF margin: rising from the high-20s toward the low-30s on operating leverage and AIP scale.
Discount rate (WACC): 10%.
Terminal growth (g): 3.5%.
Net cash: positive and supportive to equity value.
Diluted shares: modeled consistently across scenarios.

These inputs are intentionally conservative-to-balanced; if you believe the business compounds faster or at structurally higher margins, the model will show you how much that’s worth.

DCF Results (Per-Share Fair Value)

Conservative: growth 25%→10%, FCF 20%→28%, WACC 10%, g 3% → ≈ $10
Base: growth 30%→12%, FCF 28%→33%, WACC 10%, g 3.5% → ≈ $14
Bull: growth 35%→18%, FCF 30%→42%, WACC 9%, g 4% → ≈ $26

Interpretation: Even the bull scenario screens materially below today’s market price. For the stock to be “cheap” at current levels, you likely need a multi-year blend of ~30–40% growth, upper-30s to 40%+ FCF margins, and/or a meaningfully lower cost of capital—and you need that to persist without major stumbles.

What Could Prove the Model Too Cautious

If AIP continues compounding as a true platform, sales cycles can compress and expansion can accelerate, improving both growth and unit economics. Government intensity can lengthen the tail of awards, while deeper workflow integration raises switching costs and pricing power. Under those conditions, the bull case becomes more plausible, and the fair-value range shifts up quickly.

Key Risks That Can Break the Story (or the Multiple)

Growth can normalize if enterprise AI enthusiasm pauses or pilots don’t scale on schedule. Procurement shifts or data-sovereignty rules can slow public-sector timing. Valuation is highly rate-sensitive: a higher WACC can compress intrinsic value fast. Competition—from hyperscalers or faster-iterating platforms—can chip away at greenfield wins and renewal pricing.

How to Use the Model (Actionable)

Open the workbook’s Inputs sheet and change four things to match your view: growth, FCF margin, WACC, and terminal growth. The Sensitivity sheet shows how each lever moves the per-share value. If you want peer comparisons, add an EV/Sales and EV/EBITDA tab to triangulate what the market pays for similar growth/FCF profiles.

Bottom Line

Palantir’s product strength is real and increasingly embedded in mission-critical work. The debate is valuation. My DCF triangulates a fair-value range of ~$10–$26 depending on how bold you are about growth, margins, and discount rates. If you believe the company can outrun already elevated expectations for years, you may own it and let the fundamentals catch up. If you prefer a margin of safety you can defend in a storm, patience—or a better entry—may be the smarter trade

My View

Palantir is undeniably a strong business with remarkable technology, but I personally view it as overvalued at the current level.Given how far the market price has stretched beyond even optimistic fair-value estimates, I would not recommend buying right now.For investors who admire the company, waiting for a correction or a period of earnings confirmation could offer a much safer, more rational entry point.