The bullish case for Palantir Technologies (NYSE:PLTR) is growing increasingly strong. Last week, PLTR stock fell after analyst Tyler Radke of Citigroup issued a bearish take: a $5 price target.
While this news initially sent shares down, they have since rebounded on positive earnings momentum. PLTR popped yesterday in anticipation of the Q1 report, and it hasn’t stopped trending upward since the company disclosed that it beat Wall Street expectations on both revenue and earnings-per-share (EPS). This all sounds like great news for investors. However, some analysts remain skeptical of the company’s growth prospects, despite an impressive earnings report.
Does this mean that investors should still avoid Palantir, even as it comes off an excellent quarter? Let’s take a closer look at what experts are saying and why they are hesitant.
What’s Happening With PLTR Stock
Since yesterday’s earnings call, PLTR stock has been making impressive progress. As of this writing, it is up more than 21% for the day and shows no signs of slowing down. There is no reason that it should. After all, Palantir came in ahead of analyst projections in several key categories. Its EPS came in at 5 cents, opposite the predicted 4 cents, while revenue reached $525 million, topping the projected $506 million. Quarterly revenue increased 18% year-over-year (YOY), and commercial revenue rose 26%.
Palantir CEO Alex Karp attributes much of this growth to demand for Palantir’s artificial intelligence (AI) technology, which he describes as unprecedented. The company’s large language model platform has significant applications for both the public and private sectors, and it is coming to “select customers” soon. According to Karp, CNBC reports that Palantir is currently discussing deploying the platform and setting pricing with many potential clients.
This certainly sounds like a reason to bet on PLTR stock. However, not all of Wall Street is convinced. Analyst Louie DiPalma of William Blair highlighted that the company’s reported its slowest growth rate since going public. He also cited the potential for increasing competition and macroeconomic headwinds driven by U.S. government contract renewals. DiPalma added that his team expects to see PLTR trade in the $5-$6 range over the coming year. While this is more bullish than Radke’s $5 price target, it is still a step down from Palantir’s current price of more than $9 per share. That said, it seems indicative of how Wall Street as a whole feels about Palantir. As Barron’s reports:
“Overall, Wall Street analysts remain skeptical of Palantir. Of a total of 18 ratings on the stock tracked by FactSet, just three are either Buy or Overweight. Nine have Hold ratings on the stock and six have Sell or Underweight ratings. The average target price for Palantir stock across the ratings tracked by FactSet is $8.90″
Buy or Sell?
DePalma is correct that Palantir’s growth is perhaps slower than it should be. However, the headwinds he highlighted haven’t forced PLTR stock down too much yet, and they may not.
Palantir has a long history of securing lucrative government contracts, and there’s no reason to suspect that trend will stop anytime soon. The company is also on the verge of deploying a platform that is poised to help it rise even further. The AI boom isn’t slowing down, and Palantir is well-positioned to ride it to new heights in the coming year.
It’s true that PLTR stock doesn’t come without some risk. But if investors can stomach it, a point of entry below $10 per share may be too tempting to pass up, especially given the stock’s upside potential.
On the date of publication, Samuel O’Brient did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
