Palantir Technologies (NASDAQ:PLTR) had a standout year, with its stock skyrocketing over 380% in the past 12 months.
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The big data analytics company has capitalized on the AI revolution to enhance real-time decision-making, securing new clients and contracts from both governments and the private sector.
As evidence, PLTR’s Q3 revenue grew 30% year-over-year, with over 100 new deals worth more than $1 million closed in the last quarter. Additionally, with a 38% operating income margin, the company retains a significant portion of its revenues.
As the new year dawns, will the bullish sentiment surrounding PLTR persist into 2025?
Not everyone is convinced. One top investor, known by the pseudonym The Software Side of Life, believes Palantir’s valuation has become stretched.
“The valuation has far extended beyond what should be considered reasonable, even for a leading software company,” writes the investor who sits in the top 5% of TipRanks’ stock pros.
Software Side does not discount the strength of Palantir’s current fundamentals and future prospects, pointing to the long-term potential of government modernization and AI adoption (especially in light of the Trump administration’s plans to launch the Elon Musk-headed Department of Government Efficiency). However, the investor believes that these positives have already been priced into PLTR shares, leaving limited upside for investors buying in at current levels.
In fact, even if the company succeeds in satisfying the already high expectations of ~25% revenue growth in the coming year, the stock may still struggle to deliver significant gains from its current levels.
“If the company were to guide 2025 revenue guidance similar to current estimates, the stock could potentially pull back significantly, as the valuation inherently implies upside to numbers,” explains Software Side, advising investors to “applaud the fundamentals, but short the valuation.”
The investor therefore rates PLTR shares a Sell. (To watch The Software Side of Life’s track record, click here)
Most Wall Street analysts seem to think the valuation has gone a bit too far as well. With 2 Buy, 8 Hold, and 6 Sell recommendations, PLTR holds a consensus Hold (i.e. Neutral) rating. More concerning, its 12-month average price target of $44.85 implies a downside of ~44% in the year to come. (See PLTR stock forecast)
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Disclaimer: The opinions expressed in this article are solely those of the featured investor. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.
