In the wake of key milestones, such as inclusion in the prestigious S&P 500 index, analysts are updating their outlook for Palantir Technologies (NYSE: PLTR) stock, opting for a cautious stance.
The index inclusion has partly contributed to the overall optimism around the software giant, which has witnessed bullish momentum recently.
Indeed, Planatir has recorded explosive price growth, mainly due to the company’s venture into the artificial intelligence (AI) scene, leading to a 120% increase in 2024. The bullish sentiment accelerated after the firm reported impressive Q2 2024 earnings results, where revenue surged 27% year-over-year to hit $678.13 million.
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Analyst revises PLTR stock
Despite the stock’s buoyancy, Raymond James analyst Brian Gesuale has revised his outlook for Palantir, downgrading it from “Outperform” to “Market Perform.” Although the analyst remains enthusiastic about Palantir’s long-term potential in AI, Gesuale cited the need for the stock to consolidate following its extraordinary run-up in value, he said in a September 23 note.
The analyst believes the recent rally, backed by the S&P 500 inclusion, has already been priced in.
Gesuale also expressed concerns over the stock’s rich valuation following the impressive price movement. Therefore, the expert noted that further positive estimate revisions are needed to drive future growth.
“While we remain enthusiastic about Palantir’s longer-term positioning in AI, we are downgrading our rating to Market Perform from Outperform, as we believe shares need to consolidate after stellar gains and grow into their rich valuation,” Gesuale stated.
A consensus of 15 Wall Street analysts at TipRanks also shares the cautious outlook. According to the experts, PLTR is likely to plunge and trade at an average price of $27.08 in the next 12 months, representing a 27% drop from the current valuation. Experts with a bullish outlook for the stock have set a high target of $50, while the low forecast is $9
One of the analysts, William Blair, maintained an ‘Underperform’ rating on Palantir on August 6, 2024, indicating that the stock will likely drop next year.
He suggested that Palantir might be overvalued in an environment where he expects the Denver-based firm to be impacted by increased competition from government and commercial vendors as a downside.
Away from the pessimistic outlook, Bank of America (NYSE: BAC)maintained that Palantir has more growth potential, noting that it might be misunderstood regarding its position in the market. The banking giant compared this misunderstanding to early predictions about the growth of cell phone usage, where figures were greatly underestimated, overlooking the future evolution of mobile technology.
In a September 16 note to investors, BofA’s Mariana Perez Mora noted that the company’s inclusion in the S&P 500 marks a new dawn, as it will likely attract more institutional interest. She set a price target of $50.
PLTR’s selling spree
Amid this mixed outlook, Palantir has also seen notable selling activity, with Cathie Wood’s ARK ETFs among the key entities offloading PLTR shares. On September 20, 2024, ARK sold 16,053 shares valued at approximately $591,232. The investment firm has recently been reducing its position in Palantir.
At the same time, investor confidence in the company’s short-term outlook might be shaken, as CEO Alex Karp has been on a selling spree. His latest trade accounted for 9 million shares valued at approximately $325 million, as reported by Finbold on September 20.
PLTR stock price analysis
According to the most recent trading data, Palantir stock is maintaining its bullish momentum. It is valued at $37 and has gained 1% in 24 hours. On the weekly chart, PLTR has rallied 4%.
However, ahead of the market opening on September 23, the stock is exhibiting weakness, down 1.2% in the pre-market trading session.
With all factors considered, Palantir’s recent S&P 500 inclusion and AI advancements have fueled significant bullish momentum, but the stock’s rapid price growth is attracting caution. As the PLTR stock outlook remains mixed, investors will focus on the company’s ability to solidify its position in the market amid growing competition.
