Palantir Technologies (PLTR) stock has rallied by a phenomenal 361% in 2024, fueled by solid operating performance, artificial intelligence (AI) tailwinds, and inclusion in the Nasdaq 100 Index (NDX). However, most analysts are on the sidelines due to valuation concerns, with the Street’s average price target indicating a major downside risk from current levels.
Don't Miss Our New Year's Offers:
- Discover the latest stocks recommended by top Wall Street analysts, all in one place with Analyst Top Stocks
- Make smarter investments with weekly expert stock picks from the Smart Investor Newsletter
Palantir’s Pricey Valuation Could Overshadow Solid Financials
Palantir impressed investors with its third-quarter results, with revenue rising 30% year-over-year to $726 million. In particular, U.S. Commercial revenue surged 54% while U.S. Government revenue was up 40%. The company closed 104 deals having a value of over $1 million. Moreover, the customer count increased by 39% year-over-year.
The company’s Q3 adjusted earnings per share (EPS) increased 43% year-over-year to $0.10. Following the robust Q3 performance, PLTR raised its full-year revenue guidance. Additionally, Palantir expects its adjusted free cash flow in excess of $1 billion.
While the financials look impressive, the stock’s valuation looks pricey following a stellar rally and could impact its movement in the months ahead. PLTR stock is trading at a forward P/E ratio (based on adjusted earnings) of 208.4x, way higher than the sector average of 25.4x. Additionally, the stock is trading at a forward Price-to-Sales (P/S) ratio of 64.5x compared to the sector average of 3.3x.
Analysts’ Views on Palantir Stock
Recently, Baird analyst Yanni Samoilis initiated coverage of Palantir Technologies stock with a price target of $70. The analyst noted the company’s impressive position in the AI space but is concerned about its valuation. Samoilis also pointed out PLTR’s concentrated revenue base, with the top three customers accounting for 18% of the top line in 2023. Among the other risks, the analyst also noted the possibility of shifts in government contracts under the Trump administration.
Likewise, UBS analyst Karl Keirstead initiated coverage of Palantir stock with a Hold rating and a price target of $80. The analyst is impressed with PLTR’s financials and sees it as a key AI data winner. That said, Keirstead prefers to stay on the sidelines, as he believes that the stock’s valuation is “simply tough to get over.”
Meanwhile, Wedbush analyst Daniel Ives called Palantir the “Messi of AI.” He said that the company is well-positioned to expand its pipeline while offering more use cases to address critical issues across industries and support data-driven decision-making with an extensive suite of AI/ML (machine learning) offerings. Ives reiterated a Buy rating on PLTR stock with a price target of $75. However, it is important to note that despite Ives’ bullish stance, his price target for PLTR stock reflects a possible downside of over 5% from current levels.
Is PLTR Stock a Good Buy?
Overall, Wall Street has a Hold consensus rating on Palantir stock based on two Buys, eight Holds, and six Sell recommendations. The average PLTR stock price target of $44.85 indicates a downside risk of about 43.3% from current levels.
Conclusion
While Palantir Technologies has delivered strong results and is geared up to capture further AI opportunities, Wall Street remains on the sidelines and sees the possibility of the stock declining more than 43% from current levels due to its elevate valuation.
