Palantir Stock Is Headed 13% Lower, According to 1 Wall Street Analyst
Palantir Technologies (NYSE: PLTR) stock has posted strong gains across 2024's trading. Spurred by improving margins, adoption of the company's artificial intelligence (AI) services, and expectations of long-term tailwinds tied to the unfolding tech revolution, the data-software specialist's share price has risen 34% year to date. Even more striking, shares are up 186% over the last 12 months.
But one Wall Street analyst outfit is pumping the breaks on the stock. In a note published on Palantir on Thursday, brokerage firm Monness, Crespi, Hardt & Co. maintained a price target of $20 per share on the stock, but it downgraded its rating from neutral to sell.
Palantir's stock price pulled back in Thursday's trading in response to the updated coverage, falling 6.1% in the daily session. With the data software specialist's stock now trading at roughly $23 per share, Monness' price target would imply a downside of 13%.
What comes next for Palantir stock?
Monness thinks that Palantir remains in a good position to benefit from long-term artificial intelligence trends, but the firm thinks that the software company's valuation has become unreasonably stretched. In particular, the firm's analysts noted that Palantir's sales to government customers had been lumpy.
The analyst suggests Palantir's execution as being too spotty to justify an "excessive" valuation. Notably, Monness also said that it expects that the darkest days of an economic downturn are still ahead of us.
With Palantir stock trading at roughly 70 times this year's expected earnings and 19 times expected sales, there's no question that the company has a highly growth-dependent valuation. The business has seen sales growth reaccelerate in conjunction with the rollout of its Artificial Intelligence Platform suite, and margins have improved substantially.
Still, the analyst may be on to something here with its report. It would seem prudent that investors (or potential investors) who don't have high levels of risk tolerance may want to seek out more conservatively valued candidates in the AI space.
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Keith Noonan has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Palantir Technologies. The Motley Fool has a disclosure policy.
Palantir Stock Is Headed 13% Lower, According to 1 Wall Street Analyst was originally published by The Motley Fool
