Whether you’re a fan or not, there’s no denying Palantir’s (NYSE:PLTR) performance over the past year has been highly impressive; over the last 12 months, the stock has rewarded investors with a stunning 124% return.
While you could certainly make the case AI hype has played its part in pushing the shares to such heights, a closer look reveals that Palantir’s financial performance has also been eye-catching.
In its recent Q2 report, the company posted revenue of $678.1 million, marking a 27.2% increase compared to the same period last year. And while once Palantir derived its revenue primarily from government work, its push into the commercial sector is yielding results, especially in the US, where during the quarter revenue improved by 54.4% year-over-year, climbing to $159 million. Meanwhile, more clients are coming on board, while the profit profile has also been improving dramatically; to wit, adj. net income almost doubled to $221.4 million from $119.5 million a year ago.
So, plenty of positives. However, looking at the big picture, top investor Daniel Jones thinks the bull case is not bulletproof. “Despite impressive growth,” says Jones, “its valuation remains high.” Still, he’s “not ready to take a bearish stance on Palantir Technologies just yet.”
That might change soon, though. “The company is a growth machine and its balance sheet is robust,” says Jones. “However, even the healthiest companies can reach the point of being overvalued. I do think that shares are very lofty at this point in time. And I would argue that, if we continue to see the stock outperform the broader market, without some corresponding improvement in financial condition, it may not be long before a downgrade from a ‘hold’ to a ‘sell’ is warranted.”
For the moment, Jones’ rating remains a Hold (i.e., Neutral). (To watch Jones’ track record, click here)
This Hold rating aligns with the analyst consensus, which includes 5 Holds, 6 Sells, and 3 Buys. Most on the Street agree the stock is overvalued. With an average price target of $22.42, the stock is projected to trade at a 31% discount over the next year. (See Palantir 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.
