Palantir’s (NYSE: PLTR) 2024 rally, which has seen the stock surge over 260% year-to-date, is likely to have a catastrophic end, according to an expert’s outlook.
Concerns are mounting that the software company’s valuation and technical indicators are signaling caution, suggesting the current artificial intelligence-fueled trajectory may not end well, according to outlook by Puru Saxena, founder of AlphaTarget, as shared in an X post on November 19.
Saxena highlighted that Palantir is trading 41 times its next twelve months (NTM) revenue despite only projecting revenue growth of 25%. He also noted that the stock is approximately 100% above its 40-week moving average, signaling possible overextension.
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“PLTR This is wild! <…> This is not going to end well,” Saxena cautioned.
It’s worth noting that much of Palantir’s rally has been driven by its inclusion in the S&P 500 and growing optimism around its advancements in AI, catering to a wide range of clients, including enterprises and governments.
While these factors have propelled PLTR’s share price, Saxena’s analysis suggests that the stock’s valuation could leave it vulnerable to corrections, particularly if the company falls short of growth expectations.
Analysts have turned bearish on PLTR stock price
Additionally, other analysts have echoed similar concerns. In a November 19 investor note, Jefferies analyst Brent Thill flagged the company’s lofty valuation.
Thill observed that Palantir is trading at 43 times its estimated 2025 revenue—more than double the valuation of the next highest-priced software company.
Furthermore, changes in ownership dynamics have raised additional concerns. Retail ownership has declined from 49% to 42% since the company’s inclusion in the S&P 500, while institutional ownership has increased, with index funds and active managers now holding 25% and 27%, respectively.
The expert also cited recent insider selling activity as a red flag for Palantir’s future outlook. To this end, he maintained an ‘Underperform’ rating on the stock and a price target of $28.
“We note insider selling on 10b5-1 plans has rapidly picked up, with the CEO selling nearly $2B in stock over the last 3 months and over $1B in the last 2 weeks,” he said.
At the same time, professional investor Daniel Jones has raised similar concerns, noting that Palantir’s valuation appears out of control. Consequently, he downgraded the stock to a ‘Sell.’
“Even if we assume continued rapid growth for the next few years, shares are trading at levels that, frankly, don’t make sense. <…> Those are multiples that I would consider to be at the high end of the fair value range,” he said.
These warnings arise as PLTR faces bullish fundamentals that could continue to drive its price upward. For instance, Palantir was recently included in the Dow Jones Industrial Average, a move expected to attract more capital inflows into the equity.
The software giant gained further momentum following the announcement of its shift from the New York Stock Exchange to Nasdaq. However, this move proved a double-edged sword as the stock faced short-term corrections after investor sentiment soured due to remarks made by a Palantir board member, raising questions about the company’s communication style and corporate image.
PLTR stock price analysis
As of press time, PLTR had regained the $60 support zone, trading at $61.50, reflecting gains of about 1.57% over the last 24 hours.
In summary, at its current value, PLTR faces uncertainty despite a strong future outlook due to its role in AI. While the company has demonstrated growth potential, a possible correction driven by valuation concerns could present a buying opportunity.
Featured image via Shutterstock
