Palantir (NASDAQ:PLTR) has no shortage of grandiose ambitions, as CEO Alex Karp spelled out in clear, black-and-white prose in his letter to shareholders announcing the company’s Q4 2024 results last week.
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“A software juggernaut has indeed emerged,” boldly declared the CEO.
Karp could afford to be a bit self-congratulatory, as PLTR once again delivered another quarter of robust top- and bottom-line growth. Revenues of $828 million represented a 36% year-over-year growth, surpassing analysts’ expectations of $775.9 million by ~$52 million. Earnings per share of $0.14 beat expectations by a healthy margin of $0.03.
Reflecting these bullish figures, Palantir shares are showing no signs of slowing down. Over the trailing twelve months, the stock has gained ~378% in value.
While acknowledging PLTR’s successes, one top investor, known by the pseudonym JR Research, believes that things have gotten out of hand.
“PLTR has validated its business model, but bulls risk taking the potential of a massive collapse if they allow the irrational exuberance to go further,” warns JR, who sits among the top 1% of TipRanks’ stock pros.
That’s not to say the investor dismisses Palantir’s strengths. On the contrary, JR acknowledges the power of its AIP strategy and its “substantial edge” over would-be competitors. Yet, he argues that PLTR’s biggest threat isn’t rival tech firms – it’s the uncertainty of defense procurement shifts.
And yet, JR cannot get over a bloated forward earnings multiple of 200x, as the weight of these unwieldy expectations simply seems a burden too great to bear.
“Irrational exuberance seems to have overtaken the bullish thesis on PLTR here, as investors are clearly ignoring the risks of a brewing bubble building up in the stock,” the investor opined.
To put this number in perspective, JR notes that Palantir’s software peers are trading at a median of a much lower 21.4x.
“I urge you to scrutiny the thesis even further now, and think about whether it’s really time to call it a day on this stock and take profits, and don’t wait until the last dominoes fall over. Just try not to be the last bull standing,” JR summed up.
As a result, JR is reaffirming a Sell rating on PLTR shares. (To view JR Research’s track record, click here)
Though not quite as downcast as JR Research, Wall Street analysts are echoing some of the investor’s concerns. With 2 Buy, 10 Hold, and 5 Sell ratings, PLTR holds a consensus Hold (i.e., Neutral) rating. Its 12-month average price target of $88.60 implies a 24% downside in the coming year. (See PLTR stock forecast)
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Disclaimer: The opinions expressed in this article are solely those of the featured investor. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.
