Investment banker Jefferies downgraded software company Palantir (NASDAQ:PLTR), arguing that “AI hype” is “overblown.”
It rated the stock “underperform” with a price target of $13 per share.
PLTR stock fell 3.5% in overnight trading and was due to open at $15.70 per share, a market capitalization of under $34 billion.
AI Hype and Hope
Investors have been bidding up software stocks ever since OpenAI launched ChatGPT in late 2022. Before ChatGPT, Palantir was known as a “data mining” firm, pulling insights from structured and unstructured databases.
Palantir drew attention because its proprietary software was designed to deliver military decisions. The company has since created civilian case studies in areas like hospital scheduling.
However, the company only grew about 10% in 2023 and is marginally profitable. The stock sells at 16 times revenue, and it’s up 146% over the last year.
Morgan Stanley downgraded Palantir in late August, and I have consistently called it overvalued. Despite such warnings, Palantir stock has continued to race higher.
That’s because the company still has many fans, and not just TV analyst Jim Cramer. InvestorPlace contributor Will Ashworth recently speculated Palantir’s stock price could double again in 2024, helped by rising commercial contracts and its coming inclusion in the S&P 500.
Analysts are currently split on Palantir at Tipranks, with four saying buy it and five telling investors to sell. Over at Stocktwits, sentiment remains extremely bullish. Only 5% of shares are being shorted, according to Fintel, but that includes 57% held off exchanges.
Palantir itself continues to push its Western bloc military connections. It plans to hold its first board meeting of 2024 in Israel. CEO Alex Karp cited political reasons for the move and urged other companies to follow.
PLTR Stock: What Happens Next?
Palantir will continue to be controversial on Wall Street and beyond. Investors will want to see accelerating growth when it announces its December quarter results on Feb. 12.
As of this writing, Dana Blankenhorn did not hold (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.
