To The Moon

Palantir Technologies (PLTR 0.95%) is back in the spotlight. After a high-profile initial public offering, the company's stock slid almost 80% from its high in February of 2021. Many investors believed it was overhyped as it struggled to turn a profit.

Now, however, it's in the black, and the stock is up more than 340% this year alone. The company earned a cadre of loyal investors as it continues to grow its top and bottom lines by double digits.

The fervor reached a new level after the election because many believe the company will benefit from a Trump presidency. So, is Palantir a millionaire maker?

Palantir's commercial segment is booming

Founded in 2003, Palantir is anything but new, and the company has been developing artificial intelligence (AI) platforms for some time. The company's core products, Gotham and Foundry, use AI and machine learning models to help commercial and government organizations analyze and make real-time decisions.

But a synergy appears to be forming between its software and the AI hardware that has come along in the past few years thanks to Nvidia and other semiconductor companies.

CEO Alex Karp has talked about the "U.S.-driven AI revolution that has taken full hold," and Palantir is at the bleeding edge.

The company is famous for its government clients, especially national security agencies like the CIA and numerous branches of the Department of Defense, but it is finding new footing in helping businesses boost efficiency.

A new "boot camp" sales program eschews the traditional model of a sales staff (Karp firmly believes his products sell themselves), and Palantir grew its domestic client list by 77% year over year for the third quarter.

This led to a 54% jump in revenue for its commercial segment and contributed to the 27% growth in sales across the whole company. Amazingly, not only do these boot camps appear to work in boosting sales, but they are also much more cost-effective than maintaining a sales staff; third-quarter net income doubled year over year.

Palantir appears poised to expand its role under the new administration

To be clear, no explicit policies have been put forth by President-elect Donald Trump that mention Palantir, but there are plenty of signs that indicate the next four years could be lucrative for the company. Perhaps the most direct: It's been reported that Trump is considering the chief technical officer of the company for a key role in the Pentagon.

Furthermore, the efficiency its platforms provide fits nicely with the mission of the proposed Department of Government Efficiency (DOGE), the non-governmental unit co-headed by Elon Musk whose SpaceX is a partner of Palantir. The company is already heavily embedded throughout the government, and expanding its role would not be difficult.

The question at hand

So, things look good for the company, but is it good enough for us to consider it a millionaire maker? First, we have to define what that is. Let's say we need to turn $10,000 into $1 million.

We're not here to get rich quick, however -- that's a good way to lose money. Investing is about patience and keeping your eyes on a long-term horizon.

Let's say we need to make that $1 million in 30 years. But remember, inflation degrades the value of money over time: $1 million today will be worth less than $1 million in 2055 -- a lot less. If we account for inflation, 30 years from now we need $3.3 million to have the equivalent of $1 million today.

That's a 33,000% return and would mean a share price of $23,100 (it sits at just above $70 at the time of this writing). Let's assume that to reach this share price, Palantir would have to grow its earnings by roughly the same amount.

It brought in almost $150 million last quarter in net earnings. So, in 30 years, its quarterly earnings would need to be about $50 billion. While that's no easy task, I can see it being at least possible; it's certainly in line with what the largest tech companies make.

Here's the thing: Palantir currently carries a price-to-earnings ratio (P/E) of 370. We can pretty safely assume it won't be able to maintain that kind of premium for 30 years. None of the largest companies in the world do.

The biggest players in tech like Alphabet and Microsoft carry P/Es of roughly 30. Let's be generous and assume Palantir's P/E will be twice that. That means that the company would have to be making $300 billion a quarter to carry a share price of $21,000. That's not going to happen.

Alphabet is the most profitable company in tech and pulled in $26 billion in profit last quarter -- $87 billion in 2055 numbers. Given this, do you believe Palantir can bring in $300 billion? I don't.

Still, even if it doesn't meet our definition of a millionaire maker, Palantir Technologies can still be a good investment. I would say, however, to exercise caution here. There is a ton of growth already baked into its current valuation; any slip-up could be costly.