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Palantir (NYSE: PLTR) stock analysis: Buy, Sell, or Hold in 2024?

Palantir (NYSE: PLTR) stock analysis: Buy, Sell, or Hold in 2024?

Palantir’s (NYSE: PLTR) stock price has benefited from the increasing demand for artificial intelligence (AI) technology over the past year. The company, specializing in data software, has partly continued this positive momentum into 2024, registering a year-to-date gain of over 6%.

From a business perspective, the company has built a reputation focusing on military contracts and has recently expanded its efforts to attract civilian clients to enhance its offerings.

As of the latest update, the stock is currently valued at $17.60, reflecting daily gains of nearly 5%. Notably, during Monday’s trading on January 22, the stock briefly surpassed the 50-day moving average, a crucial support level closely monitored by investors.

PLTR seven-day price chart. Source: Finbold

With the stock showing a strong start to 2024, investor interest lies in whether PLTR can sustain its bullish outlook.

Why PLTR is bearish for the rest of 2024

Despite the short-term upside, Palantir faces key challenges around its business model that may paint a grim picture for the coming months. Despite its foray into AI, the technology does not guarantee success for the company, as its systems are primarily customized for military entities.

It’s worth noting that while military contracts may offer growth, this growth is unusually sluggish. Additionally, contracts remain uncertain, contingent on the ever-changing political landscape.

For instance, a recent Wall Street Journal report highlighted that the company’s revenue growth from U.S. government contracts has slowed in recent quarters. Analysts believe that government agencies, such as the Department of Defense, are exploring competitors offering more flexible solutions, a factor likely to impact PLTR shares.

This is highlighted by the fact that in 2021, Palantir experienced a 41% increase in revenue. However, its growth slowed to 24% in 2022, falling short of its projected annual revenue growth of at least 30% through 2025 mainly due to the irregular timing of its government contracts and the impact of macroeconomic challenges on its enterprise clients.

Despite having its own AI platform, the  product offering cannot be compared to entities such as OpenAI’s ChatGPT. Unlike platforms such as ChatGPT, which are readily available for users to input prompts, Palantir’s system is primarily geared towards directing military campaigns and other specialized systems. 

It also depends on machine-generated data, necessitating extensive setup and differentiation due to its proprietary technology, a factor that benefits mostly the company rather than clients. 

Palantir bullish outlook 

Despite potential setbacks, Palantir still possesses strengths that could influence its stock valuation. For instance, the company is robust in securing government contracts, particularly from military and law enforcement agencies. It has a reputation in this field. 

Despite a cooling in sales, Palantir strategically enhances profitability by cutting costs. Notably, Palantir has sustained profitability in recent quarters, an element likely to boost investor confidence. 

Analysts take on PLTR

According to Wall Street analysts, there is a bearish outlook on Palantir stock over the next 12 months. Based on the stock’s performance in the last three months, the 14 analysts predict an average price of $13.45, representing a potential decrease of approximately 23.58% from the previous price. 

The analysts at TipRanks offer a high price forecast of $21 and a low forecast of $5. Six analysts recommend selling the stock, while the remaining eight are divided between recommending selling and buying.

PLTR Wall Street analysts 12-month stock forecast. Source: TipRank

Considering fundamental factors, Palantir’s stock seems to be teetering toward the “hold” territory. Still, there is potential for an upside, especially in light of ongoing projections that the Federal Reserve might implement interest rate cuts.

Disclaimer: The content on this site should not be considered investment advice. Investing is speculative. When investing, your capital is at risk.

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