The unbridled success of AIP has had a telling effect on Palantir’s results. In the third quarter, revenue grew 30% year over year, while adjusted earnings per share (EPS) jumped 43%, but that only tells part of the story. Palantir’s U.S. commercial revenue, which houses AIP, jumped 54%, and the segment’s customer count grew 77%. Furthermore, the segment’s remaining deal value — which provides insight into upcoming results — increased by 73%. So, the future is bright.

The recent run-up in Palantir’s price has understandably sent up a red flag for some investors as it has come with a commensurate increase in its already frothy valuation. The stock is currently selling for 157 times forward earnings and 39 times forward sales, which is egregious no matter how you measure it.

This has many on Wall Street moving to the sidelines. Of the 20 analysts who cover Palantir, only four rate the stock a buy or strong buy, while 10 recommend holding, and seven rate it a sell.

The most recent bearish take comes courtesy of Jefferies analyst Brent Thill, who points to Palantir’s pricey valuation as the problem. He acknowledges the accelerating sales and profit growth, saying the “fundamentals are alive,” but calculates that Palantir would need to generate 40% year-over-year revenue growth in each of the next four years to justify the current valuation. Argus Research analyst Joseph Bonner concurs, suggesting that if Palantir’s growth story were to stumble, “the market tends to punish in highly valued tech stocks.”

On the other hand, Greentech Research analyst Hilary Kramer posited that Palantir “easily can be” a $100 stock, suggesting Wall Street needs to come to terms with the company’s accelerating growth, which she believes has just begun.

To be clear, Wall Street has a consensus rating of hold, which suggests investors should exercise care in buying the stock or simply avoid it altogether, at least for now. And these analysts have a point: Any failure to deliver from Palantir, real or imagined, could easily result in the high-priced stock taking a hit and registering double-digit share price declines.

So, what does this mean for investors worried they might miss out on the growth story of the year? I personally believe Palantir has a bright future, but I’m also aware of the potential for significant volatility — particularly in the wake of the stock’s 800% price spike since the start of 2023.

In cases like this, I tend to buy a small stake in a company, which forces me to watch the stock, paying particular attention to its future performance. This also gives me the option to add to my position at a more attractive valuation (or not), depending on how the future unfolds. Dollar-cost averaging is also an important strategy, as it allows investors to build a position, buying more shares when the price is down and fewer when the price is higher.

If Palantir’s growth continues to accelerate — and I believe it will — investors will want to own a piece of this compelling growth story, but they don’t need to bet the farm to hold a stake.

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Danny Vena has positions in Palantir Technologies. The Motley Fool has positions in and recommends Palantir Technologies. The Motley Fool has a disclosure policy.

Is Palantir Stock Still a Buy? Wall Street Is Telegraphing a Clear Answer. was originally published by The Motley Fool