Palantir Technologies‘ (PLTR -2.06%) rally is showing no signs of slowing down despite the company’s sky-high valuation. As of this writing, the stock has jumped an impressive 87% year to date and sixfold in the past year. Its three-year gain stands at a remarkable 1,740%. Each share of Palantir is now trading at just over $140 per share, a huge increase over its first-day closing price of $9.50 per share from five years ago.

This significant gain for Palantir stock may have management considering an eventual stock split, a route that has been taken by several tech giants in recent years.

What a stock split could mean for Palantir

A stock split does nothing to alter the prospects or fundamentals of a company. However, companies that choose to split their stock often believe a lower share price could lead to increased demand for their stocks due to greater accessibility.

Even with many trading platforms offering investors fractional shares, stock splits can drum up excitement in the market while decreasing the psychological barriers some investors may have to buying a stock that costs hundreds or thousands of dollars per share. These are likely reasons companies like Nvidia, Chipotle, and Super Micro Computer have all split their stocks in the past year. 

But for investors watching Palantir, valuation is a far more pressing matter than any potential stock split.

Is the stock still a buy?

Many investors watching Palantir from the sidelines are probably asking themselves: Is it too late to jump in? After all, Palantir’s trailing earnings multiple of 614 and forward earnings multiple of 256 are astronomical. Additionally, the stock is trading at an extremely rich 113 times sales. These valuation numbers make Palantir the most expensive mega-cap ($200 billion and up) stock on the entire Nasdaq exchange.

The stock’s 12-month median analyst price target of $110 points toward a 22% slide from current levels, and among 28 analysts covering Palantir, only one in four give it a buy recommendation. However, recent developments suggest Palantir is still favorably viewed on Wall Street despite its rich valuation as the company has received price-target upgrades from several firms.

The company’s customer count increased an impressive 39% year over year in the first quarter, while deal activity also picked up in pace. Palantir closed 139 deals worth at least $1 million in Q1, an increase of almost 60% from the year-ago period. This explains why the company booked $1.5 billion worth of contracts last quarter, an increase of 66%.

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The value of new contract growth was far higher than the company’s actual revenue growth during the quarter, so remaining deal value (RDV) increased 45% year over year to almost $6 billion. RDV refers to the total value of contracts that have yet to be fulfilled, so the size of this metric and its healthy growth rate clearly paint an encouraging picture for the business.

Best of all, Palantir has the potential to sustain its recent momentum for quite some time thanks to massive opportunity in the AI software market. That said, investors should remember that stocks with such high expectations attached to them carry a lot of risk — any signs of weakness could send shares tumbling, regardless of whether the company splits its stock or not.