The Valuation Game: Why Analysts Favor SAP Over Palantir in 2026

Wall Street’s Split Decision on AI Stocks

Here’s what’s puzzling many retail investors right now: Palantir Technologies skyrocketed 135% last year, yet Wall Street remains surprisingly cool on the stock. Meanwhile, an enterprise software company most people barely know about – SAP – is getting overwhelming analyst love with price targets suggesting 40% upside. The reason isn’t about growth or innovation. It’s simpler and more brutal: valuation.

The contradiction highlights a fundamental tension in today’s AI-driven market. Growth alone doesn’t guarantee stock appreciation. Sometimes, the price you pay matters more than the growth story itself.

Why Palantir Faces Skepticism Despite Blazing Growth

Let’s start with what Palantir is doing right. CEO Alex Karp recently told shareholders the company’s revenue growth is “otherworldly” – and the numbers back him up. Palantir boasts a Rule of 40 score of 114%, which is genuinely exceptional. The company is winning new contracts in both government and commercial sectors at an impressive clip.

So why are only 4 out of 25 analysts covering the stock recommending a buy?

The forward price-to-earnings ratio tells the story: 181.7x. Let that sink in. Among all 500 companies in the S&P 500, only Tesla trades at a higher multiple. For context, you’re essentially paying $182 in stock price for every $1 of annual earnings the company generates.

Analysts aren’t criticizing Palantir’s business model or growth trajectory. Their concern is straightforward – at current prices, even spectacular growth may already be priced in. The company’s PEG ratio (price-to-earnings-to-growth) sits near 2.9, which analysts typically consider unattractive for valuation purposes.

The SAP Opportunity Analysts Keep Quiet About

Now flip to SAP, the German enterprise resource planning software giant. It’s investing aggressively in AI – integrating agentic AI into its core platform and running a sovereign AI cloud for the European Union. Yet it generates far less retail excitement than Palantir.

Here’s what’s changed analyst sentiment: SAP’s forward earnings multiple is just 28.5x. More importantly, its PEG ratio is exactly 1.0 – a textbook indicator that growth is appropriately priced in, not inflated.

Of the 15 analysts surveyed by S&P Global, 12 rated SAP as a buy or strong buy. The consensus 12-month price target implies roughly 40% upside from current levels.

The difference? SAP trades where expected growth justifies the price. Palantir trades where it doesn’t – yet.

The Real Argument: When Does Growth Justify the Premium?

Palantir CEO Karp would push back hard on this analysis. In November 2025, he essentially told skeptics they’re missing the forest for the trees, arguing that outsiders struggle to grasp both the geopolitical significance of his company’s work and its true financial value.

He may have a point. Palantir’s growth story is legitimately impressive. But Wall Street’s caution probably reflects a practical truth: even exceptional growth companies eventually need valuations to reset toward Earth. When a stock trades at nearly 182x forward earnings, there’s limited room for disappointment.

SAP, by contrast, leaves room for positive surprises without requiring the stock price to hit escape velocity.

The 2026 Test

Wall Street analysts predict Palantir’s momentum will stall in 2026 – not because growth will disappear, but because valuations may finally matter. The consensus price target for Palantir reflects only low single-digit upside, suggesting most analysts see the stock as fairly valued or expensive at current levels.

For SAP, the outlook is different. Analysts believe the company’s combination of solid AI investments, reasonable valuation, and execution track record positions it for outperformance. The 40% upside prediction assumes the stock can compound steadily as growth meets expectations.

Neither prediction is guaranteed. Market surprises happen. But the underlying logic is sound: expensive stocks need perfect execution to deliver returns, while reasonably-priced stocks just need to perform as expected.

The lesson Wall Street seems to be teaching right now is that in a world full of AI hype, sometimes the boring valuation math matters more than the exciting growth narrative.