Palantir Technologies (PLTR), a leading provider of data analytics and artificial intelligence software, has been a stock market darling this year, boasting a 120% rise in 2023 alone. But despite this meteoric rise, some analysts are beginning to cool on the stock. According to Raymond James, Palantir now needs to “grow into its rich valuation,” and this has prompted them to downgrade the stock from “Outperform” to “Market Perform.”
Analysts Call for Caution on PLTR
Led by Brian Gesuale, the team at Raymond James believes that while Palantir’s long-term AI potential is still promising, its current valuation is a bit too lofty. The stock is trading at 26.1 times its fiscal 2025 sales estimates, which is considerably higher than the historical average. This steep valuation prompted the analysts to remove their previous $30 price target.
Gesuale’s sentiment echoes that of other analysts like TD Cowen’s Lance Vitanza, who also covers Palantir. Vitanza has maintained a Buy rating but set his price target at $200, cautioning that while Palantir is performing well, there’s still some skepticism about whether its stock price has room to grow from here.
Palantir Joins the S&P 500 Index
The stock’s inclusion in the S&P 500 index (SPX) has been another significant factor behind the recent surge. This news pushed shares up 23% in just a couple of weeks. Yet, as Raymond James pointed out, this may have already been fully priced into the stock, leaving investors wondering what other major catalysts might push Palantir higher in the near future.
Impressive Financials Keep Investors Hooked
Despite these cautionary signals, Palantir’s financial performance continues to impress. For Q2 2024, the company posted a staggering $135.57 million in net income, marking a 386% increase from the previous year. This kind of growth is hard to ignore, which may explain why some investors are still bullish despite the downgrades.
Is Palantir a Good Stock to Invest in?
As investors weigh the impressive financials against the cautious outlook from analysts, opinions on PLTR stock remain divided. Analysts maintain a Hold consensus rating based on four Buys, five Holds, and six Sells. The average PLTR price target of $27.08 implies a downside potential of 28.64% from current levels.
