Recent Palantir (NYSE: PLTR) stock action was quite positive, as PLTR shares managed to climb 14.59% in the past 30 days, with gains of 2.83% in the previous five trading sessions.
These gains put the PLTR stock price at $28.67 after a slight drawback of 0.07% from the latest trading session. Losses of 1.95% extended in the pre-market on July 16.
Despite last month’s gains, most Wall Street experts are still unconvinced about the prospects of this artificial intelligence (AI) stock as Palantir shares become increasingly more expensive to own due to its P/E ratio of 86.58.
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In particular, one leading stock market analyst sees an increasing likelihood of a potential 20% drop in the PLTR stock price.
Mizuho analysts see a 20% downside risk in PLTR stock
Mizuho analyst Matthew Broome downgraded Palantir’s stock from “neutral” to “underperform,” on July 16 citing its increasingly difficult-to-justify valuation.
Broome also raised the price target from $21 to $22, which still implies a 23% downside risk compared to the July 15 closing price.
Despite Palantir’s recent strong performance, analysts at Mizuho are concerned about the lack of visibility in its business with Greg Mokowitz sharing a similar sentiment.
Broome notes that some recent positive results are of lower quality and expresses limited confidence in Palantir’s ability to deliver strong results consistently.
“But primarily, following the material 67% rise in the shares YTD, we find it increasingly difficult to justify PLTR’s high multiple that, in our view, likely already discounts significant acceleration versus our/consensus expectations for 20-21% revenue growth,” Broome wrote.
The analysts point out that Palantir’s shares have risen by 67% year-to-date, making it hard to justify its high valuation multiple.
“There are some exciting aspects to the Palantir story,” they wrote. But the “valuation appears very stretched, and increasingly difficult to justify.”
“We find it increasingly difficult to justify Palantir’s high multiple,” Moskowitz wrote in a note Tuesday. “We have limited confidence in the company’s ability to deliver consistently strong results.
Analysts shift stance on PLTR stock
This sentiment follows the tune of other analysts’ recent ratings, such as Monness, Crespi, Hardt & Co.’s analyst Brian White, who also expressed valuation concerns in his June downgrade, calling the stock’s valuation “gluttonous” and out of line with other software names.
Currently, Palantir trades at an enterprise value-to-sales (EV/sales) multiple of 25-26x for 2024 and 21x for 2025, a 160% premium to the enterprise software peer group median for next year. This is considered the peak level for the past 2-3 years.
Palantir will release its Q2 results on August 5. Wall Street expects earnings per share of 8 cents and revenue of $652.1 million, up from $533 million last year.
Broader tech rally could positively impact PLTR stock
On the other hand, Wedbush Securities, known for its bullish stance on high-growth tech stocks, sees significant potential in Palantir despite its lower trading levels than other tech favorites.
Wedbush analyst Dan Ives, a noted tech sector expert, recently shared his predictions in an investor note.
While Palantir is not among the so-called Magnificent Seven, Ives and his team are optimistic about its future.
Ives stated, “We believe 2Q earnings will be a major positive catalyst for the tech sector and expect tech stocks to be up another 15% for the year, adding to the robust tech gains in 1H2024 as now the broader tech growth story takes center stage led by software, cybersecurity, digital advertising, and semis.”
Technical analysis of Palantir stock
In the wake of mixed analyst reviews, technical indicators could provide a clearer picture of the potential price movement of PLTR stock in the short to medium term.
The current price action has shifted technical indicators in Palantir’s favor, as its stock successfully overcame the most recent resistance point at $27.50, with $20.33 acting as support.
Furthermore, PLTR stock currently trades above its 50, 100, and 200-day simple moving averages, which highlights the potential for further gains in the short term.
The relative strength index (RSI) shows that Palantir stock currently exhibits increased buying pressure. At the latest close, its RSI indicator was 65.49.
As the Q2 earnings call is less than a month away, investors should monitor further developments that could impact PLTR’s stock price movement in the short term.
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Disclaimer: The content on this site should not be considered investment advice. Investing is speculative. When investing, your capital is at risk.
