Investors who have previously jumped on the Palantir (NYSE:PLTR) bandwagon have good reason for cheer. The company’s stock is up ~83% in the last 12 months, with almost 83% of these gains in 2024 alone.
The big data analytics company has been one of the biggest beneficiaries of the AI revolution, and it continues to gain both commercial and sovereign customers looking to better utilize their data sets to improve decision making.
Even world leaders such as Microsoft see an advantage in working with Palantir. The two companies announced a strategic partnership last month, and this cooperation will provide PLTR with additional opportunities to engage with U.S. government agencies.
However, PLTR’s white-hot growth has convinced one investor, known by the pseudonym KM Capital, that now is the time to take the foot off the gas pedal.
“Valuation analysis suggests that there is no upside left after the recent bull run,” writes the investor.
To be clear, KM Capital remains “quite bullish from a long-term perspective.” Nonetheless, the investor argues that Palantir’s current P/E ratio is overly dependent on “very aggressive profitability expansion.”
Yet, as often happens, valuations and market sentiment can diverge. KM Capital admits that positive momentum might continue to drive the stock higher in the short term.
“The show can go on for a while, depending on the extent of optimism in the stock market,” writes KM Capital, who concludes that the “FOMO factor might fuel optimism further.”
Believing the stock is fairly valued, KM Capital is downgrading Palantir from a Strong Buy to a Hold, while assessing PLTR’s fair share price at around $32. This figure suggests the shares will likely remain rangebound for the foreseeable future. (To watch KM Capital’s track record, click here)
Wall Street by-and-large shares a similar view. Over the past three months, 14 analysts have weighed in on Palantir, resulting in 3 Buy recommendations, 5 Holds, and 6 Sells, culminating in a consensus Hold rating. The average 12-month price target of $25.42 implies a potential downside of ~19%. (See PLTR stock forecast)
To find good ideas for stocks trading at attractive valuations, visit TipRanks’ Best Stocks to Buy, a tool that unites all of TipRanks’ equity insights.
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.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
