Is this the major correction analysts have been predicting—or even hoping for—in Palantir stock? A pullback in PLTR shares seems more likely than not at this point. However, as of late trading on December 19, PLTR stock had made up most of the prior day’s losses and is up 314% in 2024.

Still, many analysts continue to question Palantir’s extended valuation. The stock trades at over 65x sales and has a forward price-to-earnings (P/E) ratio of 361x. Even among technology stocks, that’s a stiff premium to pay.

The party can’t last forever, can it? If you’re in PLTR stock for the long haul, you really don’t care. But if you’re looking to trade the stock, it matters a lot. Let’s look at the state of play for Palantir heading into 2025.

Palantir Continues to Stack Wins

Palantir’s inclusion in the NASDAQ 100 isn’t the only bullish news for the stock. The company announced deals with Booze Allen Hamilton (NYSE: BAH) and Anduril in early December. Both contracts will expand the company’s work with the U.S. government to ensure that it can lead the world in artificial intelligence.

Some of the specific work that Palantir does with the U.S. government is secret, but it’s not a secret that the U.S. government is Palantir’s largest customer. That’s one reason the deals with Booze Allen and Anduril are significant.

However, the company has lined up two additional contracts in the last month. On December 18, Palantir announced a $401 million contract extension related to its AI-powered Army Vantage platform. The contract, which spans four years, may have a total ceiling value of over $619 million.

The surge in Palantir stock is due to more than just the company’s government business. The commercial side of the business now accounts for nearly 50% of the company’s revenue and shows that the company is attracting clients as diverse as Pray.com and Rio Tinto Group (NYSE: RIO).

Palantir Offers Investors More Than a Semantic Difference

The bearish argument for avoiding Palantir is that the stock is overvalued. By any objective measure, it is. Therefore, many analysts will repeat the mantra that investors should avoid investing in a company based on the premise that “this time it’s different.”

As someone who values precise language, I’d argue that Palantir isn’t just different—it’s unique. No other company is currently doing what Palantir does with artificial intelligence, and that’s unlikely to change anytime soon. This distinct market position reshapes how many investors perceive the stock, supporting a continued upward bias for PLTR well into 2025.

The company’s ontology allows it to make AI a key part of its operations. And it does so in a way that shows other companies and investors how AI can be monetized. In that respect, it’s not only logical that the U.S. government is not only maintaining but also extending its contracts with Palantir.

PLTR Stock Is Due for a Correction, But Earnings May Be a Better Bet

Institutional investors are frequently at odds with retail investors, but never more so than at the end of a year. While many retail investors are looking to trim positions to take profits or as part of a tax-loss strategy, institutions are frequently hitting the Buy button. 

That's because they don’t want to be caught offside with their clients. Therefore, they want to be sure to have exposure to stocks like PLTR heading into 2025. That should hold support on PLTR stock at around $70. And if there’s a Santa Claus rally, the stock could even push through $80, as it did earlier this month.

After that, the next mover will be the company’s earnings report, which won’t happen until February 2025. With expectations so high, it’s not hard to see the company missing on earnings in the same way that NVIDIA Corp. (NASDAQ: NVDA)missed. And that could be a reason for the stock to correct, particularly with the broader market set for a choppy start to 2025.