Palantir (NASDAQ:PLTR) finished 2024 as one of the market’s standout performers but has since lost some of its luster in the new year. The stock has been sinking due to broader macroeconomic concerns and fears that PLTR’s rapid ascent in 2024 has left it overvalued.
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However, PLTR’s competitive advantages with sovereign clients give one investor – known by the pseudonym Tangerine Tan Capital – confidence that the company will be a winner for years to come.
“PLTR’s unique position and exceptional AI capabilities make it a compelling long-term investment,” the investor argues.
Tangerine explains that PLTR’s expanding government work is a testament to its quality. In addition, the investor notes how the sensitivity of these operations gives it a distinct advantage when it comes to fending off potential competitors.
“Palantir has enormous barriers to entry through its customer relationships, security clearances, and the cost of switching is enormous because Palantir has become the heart of many operations,” adds Tangerine.
Although PLTR’s valuations are elevated, the investor remains unconcerned about these high multiples over the long term. Tangerine emphasizes the importance of future cash flows, noting that stalwarts like Amazon, Tesla, and Microsoft were also considered overvalued despite their high multiples. For patient investors with a 5-10 year horizon, Tangerine suggests that based on expected annual growth rates of 20%, these high valuations become less significant, making PLTR an attractive choice for a forward-looking portfolio.
“The multiple is high right now, but the earnings growth will more than make up for it,” concludes Tangerine, who rates PLTR shares a Buy. (To watch Tangerine Tan Capital’s track record, click here)
However, Wall Street’s sentiment is more reflective of the recent market moves that have pushed share prices downwards. With 2 Buy, 8 Hold, and 7 Sell recommendations, PLTR holds a consensus Moderate Sell rating. Additionally, the 12-month average price target of $46.57 points to a potential downside of 28% in the year ahead. (See PLTR 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.
