Some stocks are destined to generate plenty of debate. Palantir (NYSE:PLTR) is one such name, with analysts regularly presenting a diverse range of opinions on the big data specialist, resulting in no clear consensus on its future direction.
The view from investors, however, has been more equivocal and in a positive way. That is easy to see, considering the stock has gained more than 68% since the turn of the year.
But that encapsulates the problem, says Mizuho’s Gregg Moskowitz, a 5-star analyst rated in the top 4% of the Street’s stock pros, who thinks the stock’s valuation is “hard to justify.”
“The shares now trade at a CY24 and CY25 EV/Sales multiple of 25-26x and 21x, which we note now reflects an exceedingly large 160% premium to our enterprise software peer group median for next year,” Moskowitz went on to explain. “Also, PLTR’s current NTM EV/sales multiple is at peak levels as measured over the past 2-3 years. We find it increasingly difficult to justify PLTR’s high multiple that in our view likely already discounts significant acceleration.”
Moskowitz does concede that over the past few quarters the company has “executed generally well.” That said, the analyst thinks Q1’s 3% beat was “quite a bit less impressive than it appeared on the surface,” with Moskowitz of the mind some of Palantir’s beats have been of “lower quality.”
The PLTR story certainly has some “exciting aspects” to it – such as megadeals and the AIP (artificial intelligence platform) – although these are countered by a “lack of transparency and a likelihood of lumpy results going forward.”
As such, Moskowitz has doubts regarding the company’s ability to consistently achieve strong results and accelerated growth, which are both necessary to “justify its premium valuation.”
Bottom line, Moskowitz downgraded his PLTR rating from Neutral to Underperform (i.e., Sell). His $22 price target implies a downside of ~24% from current levels. (To watch Moskowitz’ track record, click here)
Amongst Moskowitz’ colleagues, 5 others join him in the bear camp, 3 stay positive, while 5 remain on the sidelines with Hold ratings, all coalescing to a Hold consensus view. The $22.42 average price target is only slightly above Moskowitz’ objective and factors in a 12-month decline of 22%. (See Palantir stock forecast)
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Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.
