Palantir (NASDAQ: PLTR) has been one of the hottest stocks on Wall Street, rising nearly 600% since the start of 2024. That's an incredible return in just over a year, and it has made Palantir one of the highest-valued software stocks on the market.
However, its business growth hasn't quite kept up with its stock returns, as its revenue is only up 29% in that same period. As a result, I think Adobe (NASDAQ: ADBE) stock could be bigger than Palantir by the end of 2025.
Where to invest $1,000 right now? Our analyst team just revealed what they believe are the 10 best stocks to buy right now. Learn More »
This prediction isn't about Adobe suddenly growing and challenging Palantir to a growth race; it's about realistic stock valuations.
Adobe has much higher sales and earnings than Palantir
Palantir has gotten a ton of attention due to its focus on artificial intelligence (AI) software. Many companies and government entities have turned to Palantir to deploy its data analytics software, as it has a proven track record of success. Palantir also has its Artificial Intelligence Platform (AIP) product that has become a hit among many of its new clients. AIP allows its users to integrate its AI-powered analysis throughout a company's inner workings, taking AI from a tool that's used on the side to one that's fully integrated. Additionally, AIP allows its users to deploy AI agents that can automate some of the tasks humans traditionally did.
Adobe is much better known, as its creative design software suite has become the industry standard in any field that requires graphics design. Adobe hasn't fallen behind in the AI arms race either, as it has created multiple tools that allow its users to harness the power of generative AI to modify graphics or create new ones.
Each company is dominant in its respective field, but Adobe has a much bigger head start on Palantir. Over the past 12 months, Adobe has generated around 7.5 times as much revenue and 12 times as much profit as Palantir.
PLTR Revenue (TTM) data by YCharts
A reasonable analysis would conclude that Adobe should be valued at a higher level than Palantir just due to its size. However, that's not the case. At recent prices, Palantir's market cap is $268 billion, while Adobe's is $199 billion. That's quite the disconnect from conventional thinking.
So, how is Palantir valued more than Adobe right now? It all has to do with growth expectations.
Palantir's growth level is far greater than Adobe's, but is it enough to justify the price difference?
The area where there is no debate Palantir is beating Adobe is its revenue growth rate. While Palantir's revenue growth has accelerated over the past 12 months, Adobe's hasn't.
PLTR Operating Revenue (Quarterly YoY Growth) data by YCharts
This has caused investors to be incredibly bullish on Palantir's stock while turning bearish on Adobe's. While I agree with both sentiments, I completely disagree with the valuations the two companies have attained.
To compare the two, let's project what they may look like five years down the road. For 2025 and 2026, Wall Street analysts project 32% and 26% revenue growth for Palantir, but let's just throw reasonable expectations out the window. Instead, we'll say that Palantir can grow its revenue at a 40% pace for the next five years.
Adobe's revenue growth projections for next year are 10%, but let's artificially tweak it down to 8% growth over the next five years.
Clearly, I'm stacking the odds in Palantir's favor, but it doesn't matter. After five years, Palantir would have $15.4 billion in revenue, not even enough to catch Adobe's current total. Adobe would have $31.5 billion in revenue after five years, still double what Palantir has. It would take nearly eight years for Palantir to catch Adobe at these respective growth rates.
So, even if I artificially inflate Palantir's growth rate to a level that management isn't projecting and sustain it for an incredibly long time (nearly eight years), it still wouldn't be as large as Adobe is now.
This just illustrates how ridiculously high Palntir's stock is valued right now. Investors need to be careful, as it could revert to a more reasonable valuation any day now.
Don’t miss this second chance at a potentially lucrative opportunity
Ever feel like you missed the boat in buying the most successful stocks? Then you’ll want to hear this.
On rare occasions, our expert team of analysts issues a “Double Down” stock recommendation for companies that they think are about to pop. If you’re worried you’ve already missed your chance to invest, now is the best time to buy before it’s too late. And the numbers speak for themselves:
- Nvidia: if you invested $1,000 when we doubled down in 2009, you’d have $361,026!*
- Apple: if you invested $1,000 when we doubled down in 2008, you’d have $46,425!*
- Netflix: if you invested $1,000 when we doubled down in 2004, you’d have $562,659!*
Right now, we’re issuing “Double Down” alerts for three incredible companies, and there may not be another chance like this anytime soon.
*Stock Advisor returns as of February 3, 2025
Keithen Drury has positions in Adobe. The Motley Fool has positions in and recommends Adobe and Palantir Technologies. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
