Palantir Technologies Inc.PLTRNYSE

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DCF Valuation

DCF Valuation Summary

Strong Sell

Fair Value: $50.74 per share(market-calibrated)

-62.5%

Upside to Fair Value

Current

$135.38

Pure Model

$22.52

Fair Value

$50.74

Bull Case

$34.78

Bear Case

$13.79

Market Reality Check

Model Terminal Growth

3.75%

Market-Implied Growth

Unreachable

Calibrated Growth

75/25 blend

Market price implies assumptions beyond model range. Fair value blends 75% model / 25% market price.

What's Driving This Ratingfor PLTR

✓

CapEx already efficient

CapEx at 0.51% of revenue is already at or below sector maintenance level. No normalization needed — cash conversion is already strong.

↑

Margin expansion modeled

Current EBIT margin is 21.66% — below the sector mature average of 31.59%. Model expands margins as the business scales and operating leverage kicks in. Year 10 EBIT reaches $5.3B (24.30% margin).

⚠

Analyst growth decelerates sharply

Revenue growth drops from 60.39% in Year 1 to 3.75% by Year 5 (per analyst consensus). This growth deceleration is a key reason the model may undervalue the stock if growth re-accelerates.

↔

Perpetuity and exit methods disagree

Perpetuity growth gives $16.43/share (12.4x terminal FCF) while exit multiple gives $28.62/share (30.6x terminal FCF). The 28x EV/EBITDA exit reflects current market multiples, while the perpetuity method with 3.75% growth is more conservative. The base case averages both methods.

⚠

Market price exceeds model's maximum

Even with the most optimistic terminal growth the model allows, it can't reach $135.38. The market is pricing in factors beyond the DCF framework — possibly optionality, brand premium, or expectations of margin/growth inflection not yet in analyst estimates.

✓

Strong cash flow conversion

Year 10 FCF/EBITDA conversion of 91.61% indicates efficient cash generation. FCF reaches $5.0B by Year 10 (22.79% FCF margin).

Weighted Average Cost of Capital (WACC)

Cost of Equity (CAPM)

Risk-Free Rate (Rf)4.50%

Beta (β)1.69

Market Risk Premium4.50%

*Using current implied premium (4.5% per Damodaran 2026), not historical (6.5%)

Cost of Equity (Re)12.09%

Cost of Debt

Pre-tax Cost of Debt0.97%

Tax Rate5.00%

After-tax Cost of Debt0.93%

Equity Weight (E/V)99.93%

Debt Weight (D/V)0.07%

WACC Calculation

WACC = (E/V × Re) + (D/V × Rd × (1-Tc))

WACC = (99.93% × 12.09%) + (0.07% × 0.93%)

= 12.08%

10-Year Free Cash Flow Projections(showing years 1, 3, 5, 7, 10)

Year	Year 1	Year 3	Year 5	Year 7	Year 10
Revenue	$7.2B	$14.4B	$18.2B	$19.6B	$21.9B
EBIT	$1.6B	$3.1B	$4.2B	$4.6B	$5.3B
Tax	$78M	$156M	$208M	$232M	$266M
NOPAT	$1.5B	$3.0B	$4.0B	$4.4B	$5.1B
+ Depreciation	$41M	$83M	$105M	$113M	$126M
- Capex	$37M	$73M	$93M	$100M	$112M
- Δ NWC	$270M	$414M	$66M	$71M	$79M
Free Cash Flow	$1.2B	$2.6B	$3.9B	$4.3B	$5.0B
Discount Factor	0.892	0.710	0.565	0.450	0.320
Present Value	$1.1B	$1.8B	$2.2B	$2.0B	$1.6B

FCF Formula: Free Cash Flow = NOPAT + Depreciation - Capex - Change in Net Working Capital

Terminal Value Calculation

Perpetuity Growth Method

Year 10 FCF$5.0B

Terminal Growth Rate3.75%

WACC12.08%

TV = FCF₁₀ × (1+g) / (WACC-g)

Terminal Value$62.1B

PV of Terminal Value$19.9B

Exit Multiple Method

Year 10 EBITDA$5.4B

Exit Multiple (EV/EBITDA)28.0x

TV = EBITDA₁₀ × Exit Multiple

Terminal Value$152.5B

PV of Terminal Value$48.7B

Valuation Summary

Perpetuity Growth Method

PV of Projected FCFs$17.9B

PV of Terminal Value$19.9B

Enterprise Value$37.7B

(-) Net Debt-$1.2B

Equity Value$38.9B

Shares Outstanding2.4B

Price per Share$16.43

Exit Multiple Method

PV of Projected FCFs$17.9B

PV of Terminal Value$48.7B

Enterprise Value$66.6B

(-) Net Debt-$1.2B

Equity Value$67.8B

Shares Outstanding2.4B

Price per Share$28.62

Pure Model Fair Value

$22.52

Average of perpetuity growth and exit multiple methods (before market calibration)

Sensitivity AnalysisPrice per Share

WACC ↓ / Growth →	2.75%	3.25%	3.75%	4.25%	4.75%
10.08%	$26.83	$27.27	$27.78	$28.38	$29.09
11.08%	$24.23	$24.54	$24.90	$25.31	$25.78
12.08%	$22.04	$22.27	$22.52	$22.81	$23.14
13.08%	$20.15	$20.32	$20.51	$20.72	$20.96
14.08%	$18.51	$18.64	$18.78	$18.94	$19.12

How to read: This table shows how the valuation changes with different WACC (discount rate) and terminal growth rate assumptions. Green = undervalued, Red = overvalued.

Scenario Analysis

Bear Case

$13.79

-89.8% vs current

• -25% vs analyst consensus
• Terminal growth: 3.3%
• Beta: 2.11

Base Case

$22.52

-83.4% vs current

• Analyst consensus
• Terminal growth: 3.8%
• Beta: 1.69

Bull Case

$34.78

-74.3% vs current

• +25% vs analyst consensus
• Terminal growth: 4.3%
• Beta: 1.43

Key Assumptions & Drivers• Technology Sector

Growth Assumptions (Select Years)

Year 1 Revenue Growth60.39%

Year 3 Revenue Growth40.35%

Year 5 Revenue Growth3.75%

Year 7 Revenue Growth3.75%

Year 10 Revenue Growth3.75%

Terminal Growth Rate3.75%

Margin & Efficiency

Current EBIT Margin21.66%

Terminal EBIT Margin31.59%

Tax Rate5.00%

Historical Capex / Rev0.51%

NWC / Revenue10.00%

Key Drivers: Revenue growth, operating margin expansion, capex efficiency, and working capital management are the primary drivers of cash flow generation. Terminal value assumptions significantly impact final valuation.

Institutional-Grade Methodology

Actual Company Data: Revenue, EBIT, Capex, NWC, Tax Rate, Interest Expense, Beta

Market Assumptions: Risk-free: 4.5% (10Y), MRP: 4.5% (Damodaran 2026), Exit: 28x EV/EBITDA (Technology sector)

This DCF model is for informational purposes only. Projections are based on assumptions that may not materialize. Past performance does not guarantee future results. Consult a financial advisor before making investment decisions.

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