Down 35% From Its All-Time High, Should You Buy the Dip on Palantir Stock?

Palantir has delivered incredible results recently, so why is the stock down?Palantir Technologies (PLTR 3.51%) has been the darling of the stock market since 2023. It has posted incredible growth over the last three years, but the tides have turned for Palantir stock in 2026. Although it last set a new all-time high in October 2025, it ended 2025 about 10% down from that high. It has had a poor 2026 and is now down around 35% from its high. That's a sizable discount on a stock that many point to as a poster child of what artificial intelligence (AI) adoption can provide for businesses. Furthermore, Palantir's Q4 2025 results were excellent, and its 2026 guidance was fantastic as well. So, what's behind the stock's decline? Image source: Getty Images. Palantir's stock is expensive Normally, when you see a stock that has a great future, is executing at a high level, and is well viewed in the eyes of the market, yet is still declining, there's only one culprit: valuation. And that's exactly the case for Palantir. Palantir was one of the most expensive stocks on the market when its decline began, and even after its sell-off, it is still expensive. I think the forward price-to-earnings ratio is the most appropriate valuation metric for Palantir, as it's rapidly growing and fully profitable. From this standpoint, Palantir still trades at over 100 times forward earnings. PLTR PE Ratio (Forward) data by YCharts Very few stocks trade at this level because of the fantastic results required to meet these expectations. If we believe a more realistic target for Palantir is in the 30x forward earnings range, then Palantir's earnings projections must grow by 243%. For 2026 and 2027, Wall Street analysts expect Palantir's growth to be 62% and 41%, respectively. That would only equate to 129% growth in two years, which means there's around three to four years of growth already baked into the stock price. ExpandNASDAQ: PLTRPalantir TechnologiesToday's Change(-3.51%) $-4.75Current Price$130.49Key Data PointsMarket Cap$312BDay's Range$127.40 - $132.0052wk Range$66.12 - $207.52Volume1.5MAvg Vol44MGross Margin82.37% Nobody is going to argue that Palantir isn't growing rapidly or executing at a high level. It's one of the best around, and many companies should look to Palantir as an example of how to run headfirst into an emerging trend. However, is Palantir's stock worth paying a premium for three to four years' worth of growth? I think the answer is no, and I believe the market's sell-off is likely conveying the same sentiment. As a result, I don't think Palantir's stock is worth buying on the dip. Several other rapidly growing AI stocks aren't nearly as expensive as Palantir, and they can offer greater long-term return potential even if their growth rate is slower due to a more reasonable starting valuation.Read NextFeb 23, 2026 •By Eric TrieStock Market Today, Feb. 23: Palantir Falls as Market Pullback and Governance Questions WeighFeb 23, 2026 •By Geoffrey Seiler3 Predictions for Palantir in 2026Feb 21, 2026 •By Geoffrey SeilerIs Palantir a Buy, Sell, or Hold in 2026?Feb 21, 2026 •By Trevor JennewineBillionaire Israel Englander Sells Nvidia Stock and Buys an AI Stock Up 2,000% Since Early 2023Feb 21, 2026 •By Danny Vena, CPAFamed "Big Short" Investor Michael Burry Made a Dire Prediction About Palantir Stock. I Think He's Dead WrongFeb 20, 2026 •By Patrick SandersBetter Software Stock: Palantir vs. BigBear.aiAbout the AuthorKeithen Drury is a contributing Motley Fool technology analyst covering AI, semiconductors, cybersecurity, and SaaS stocks. In addition to The Motley Fool, Keithen is a mechanical engineer and has held roles at Honeywell and smaller industrial companies like Brand Hydraulics and Lincoln Industries. He holds a bachelor’s degree in mechanical engineering from Dordt University.TMFTripleOptionStocks MentionedPalantir TechnologiesNASDAQ: PLTR$130.49 (3.51%) $4.75*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.