Is Palantir (NYSE:PLTR) stock overvalued? According to one Wall Street firm, the answer is yes. Analysts at Monness, Crespi, Hardt recently downgraded PLTR stock, citing its “egregiously rich valuation.” The firm set a bearish price target of $20 and dropped shares from “neutral” to “sell.” As a result, the stock is down today, currently 5% in the red as investors wonder whether this means the ride is over for the artificial intelligence (AI) innovator.
Not everyone is convinced that PLTR stock is a loser, however. While shares of the company have struggled lately, Palantir is still a cutting-edge AI stock at a time when investors are frantically searching for the next Nvidia (NASDAQ:NVDA).
What’s Happening With PLTR Stock?
Despite its poor performance recently, PLTR stock has enjoyed an excellent past six months, rising by almost 50%. The company quickly began riding the AI wave sparked by the launch of ChatGPT in November 2022. Since then, shares have climbed to impressive highs. Still, for all its success, Wall Street sentiment toward Palantir has never been too positive. Indeed, Monness isn’t the only firm to issue a bearish take on PLTR stock recently; Jefferies reiterated a “hold” rating last week.
In a recent report, Monness analyst Brian White described the past year as an “unprecedented generative AI hype cycle” that is the reason for Palantir’s overvaluation. As Seeking Alpha reports, Monness also views Palantir’s government contract revenue as uneven and that its execution as “spotty,” with even darker days ahead.
However, other experts aren’t so pessimistic about its growth prospects. Louis Navellier and the InvestorPlace Research Staff recently laid out a bullish thesis for PLTR stock, stating that “the bears are wrong” about this AI sensation. Navellier noted the concerns regarding Palantir’s valuation, but provided context as to why other factors are more important:
“Concerns about the company’s future mostly surround valuation and potential downsides of staying in. Admittedly, shares in this AI enterprise software powerhouse do appear ‘priced for perfection.’ […] However, don’t assume that means that a sharp and sudden fall is imminent […] While seemingly pricey at 76.2 times forward earnings, subsequent results could help shares not only sustain their valuation, but add to it as well.”
Why It Matters
There’s another reason to argue that “the bears are wrong” about PLTR stock. Palantir is a dynamic company. While it is usually considered a data analytics firm, investors shouldn’t ignore the fact that Palantir offers exposure to many sectors. Its software has applications for industries like cybersecurity, automotive and mobility, energy and semiconductor production. Say what you will about its government revenue, but the firm’s history of procuring lucrative contracts shouldn’t be disregarded, either.
Market momentum has been negative recently, but PLTR will likely shake it off and keep rising. Even with bearish sentiment from Wall Street, the company still has a lot to offer investors and AI hype isn’t going anywhere.
On the date of publication, Samuel O’Brient 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.
