Palantir'sShares May Decrease by 40% Within a Year as Per Wall Street Experts, Raising Questions About the Future of This AI-Driven Company's Stock.
Palantir Technologies (PLTR), the AI and data analytics software company, has been on a roll this year. With a near-quadruple increase in its value since the 2024 election, Palantir has become a hot topic among investors. However, not everyone is bullish on this high-flying stock.
Wall Street's consensus 12-month price target for Palantir sits at $39.57, significantly lower than its current share price. Even if we discount the ultra-bearish target of $11 from one analyst, the average still indicates a bearish stance. Seventeen out of the nineteen analysts surveyed by LSEG rate Palantir as an "underperform" or a "hold." Only four analysts are bullish, recommending a "buy" or a "strong buy."
Why the Pessimism?
Despite Palantir's impressive revenue growth and earnings in Q3 2024, there are valid reasons for the skepticism. First and foremost, the stock's valuation is a concern. With a forward P/E ratio of 145, Palantir's shares are priced for perfection, an unattainable feat even for the most promising companies.
Moreover, the AI market is becoming increasingly competitive. Players such as Microsoft and IBM are entering the same sectors Palantir serves, potentially eroding its market position. Regulatory and ethical concerns also loom over the company, given its executive team's past questionable strategic decisions.
Historically, Palantir's stock has been volatile, making it a risky investment. For instance, the stock lost more than half its value in 2022 after missing earnings expectations and providing disappointing outlooks.
Can Wall Street be Right?
Palantir's strong business performance and earnings growth suggest it will continue to thrive in the near future. However, the company's valuation is a significant red flag. Ruddering the stock's growth to realistic expectations might be challenging, considering its current P/E ratio and PEG ratio (based on five-year earnings growth projections).
In conclusion, while Palantir Technologies has proven to be a highly-performing company, its current valuation and other market factors have raised concerns among analysts. Investors should approach this stock with caution and consider the risks associated with its high valuation and competitive landscape.
Investors might want to reconsider their focus on investing in Palantir Technologies due to its high financial risk, given its exorbitant forward P/E ratio of 145. Additionally, the intensifying competition in the AI market from companies like Microsoft and IBM may impact Palantir's financial prospects.
