Stock-Split Speculation Looms over Surveillance Tech Firm Palantir’s Earnings

Three months ago, software giant Palantir reported quarterly revenue of over a billion dollars for the first time. Sales rose 48% year over year, handily beating the Wall Street consensus of 38%. The extent to which Palantir blew past estimates was perhaps something only the controversial surveillance technology company could have seen coming.

As Palantir prepares to report its third-quarter results after the bell today, its share price has increased by 380% over the past 12 months. Retail investors are clamoring for a stock split that would lower the price and introduce more investment activity to support what some analysts say is a stretched valuation.

Government Relations

Analysts expect more sky-high growth from Denver-based Palantir today. The company has been one of the top beneficiaries of Trump administration policies, with US revenue climbing 68% year-over-year in the second quarter. Under CEO Alex Karp, a former Democratic Party donor, the firm has contributed money for the new ballroom President Trump is building at the White House and sponsored the president’s parade for the 250th anniversary of the US Army.

In August, Palantir signed a 10-year deal with the Army worth up to $10 billion, consolidating 75 existing contracts. In April, Immigration and Customs Enforcement (ICE) disclosures revealed that Palantir had won a $30 million contract to develop a surveillance platform to support the agency’s crackdown on undocumented migrants. Recent partnerships with Boeing and Nvidia added to its defense and tech bona fides, respectively. Still, some on Wall Street have warned that Palantir’s surge has distorted its valuation:

• Leading skeptic RBC Capital Markets said last week that, barring a remarkable beat-and-raise result in today’s report, Palantir’s valuation is likely “unsustainable.” Analysts maintained their pessimistic $45 price target, though shares closed at $200.47 on Friday. Ultimately, it’s hard not to do a double-take at Palantir’s forward price-to-earnings ratio of 217.39, almost 10 times that of the S&P 500, which was 23.45 at Friday’s close.
• Retail investors, RBC said, are yearning for a stock split, which they consider “the most relevant topic.” While splits don’t change a company’s valuation, they lower the price of individual shares, which can sometimes create excitement among new investors with a lower barrier to entry, increasing trading activity.

It Follows: Nvidia, which has also seen its valuation skyrocket, completed a 10-for-1 split in June 2024. Netflix, currently only one of 10 S&P 500 firms with a stock price over $1,000, announced last week a 10-for-1 split to be carried out later this month.