Shares of Palantir (NYSE:PLTR) slumped in trading on Friday after top-rated Monness, Crespi, and Hardt analyst Brian White downgraded the data analytics company to a Sell. The analyst cited the company’s “gluttonous valuation” for the downgrade. Indeed, PLTR stock has surged by more than 60% over the past year.
White’s Rationale for the PLTR Downgrade
Furthermore, White stated that PLTR’s valuation based on enterprise value-to-revenue was higher than that of any other stock in his software coverage universe. The analyst stated, “As multiples in the space have contracted in recent weeks, Palantir’s valuation has expanded. Palantir also trades at a generous premium to the three fastest-growing companies in this group.”
Drawing a comparison between PLTR and Snowflake (NYSE:SNOW), White commented that PLTR trades at 17.7 times his FY25 sales estimates, while he expects the company’s sales to grow by 23% in FY24. In contrast, SNOW is trading at a multiple of 8.3x on the same metric, while its sales are projected to increase by 34% in FY24.
The analyst added that he believes the market will move away from software stocks with excessive valuations. White’s price target of $20 implies a downside potential of 18.1% at current levels.
Is PLTR a Good Stock to Buy Now?
Analysts remain sidelined about PLTR stock, with a Hold consensus rating based on three Buys, seven Holds, and three Sells. The average PLTR price target of $22.80 implies a downside potential of 6.4% from current levels.
