Palantir (NASDAQ: PLTR) stock remains a standout success story in the ongoing artificial intelligence (AI) rally, but a section of Wall Street remains unconvinced of its long-term sustainability.
Indeed, the stock has experienced a pullback in recent sessions, which generally aligns with the broader stock market price movement.
At press time, PLTR stock was valued at $96.13, down 0.6% for the day, while the American software giant is up almost 30% year-to-date.
Picks for you
Wall Street concerns on PLTR stock’s prospects
One lingering concern around Palantir is its overvaluation, with some analysts maintaining that the stock could crash if it fails to meet growth expectations. This concern is backed by the fact that as of March 24, PLTR’s price-to-earnings (PE) ratio stood at a staggering 755.67.
Among the analysts sounding the alarm on Palantir is Jefferies’ Brent Thill, who predicted that the stock could drop to $60 in late February, reiterating his ‘Underperform’ rating. Beyond valuation concerns, Thill’s bearish stance is fueled by sluggish hiring, stalled international growth, insider selling, and leadership uncertainty.
RBC’s Rishi Jaluria has also warned of more downside for PLTR, citing the resignation of its Chief Accounting Officer, potential defense budget cuts, and CEO Alex Karp’s plan to sell up to 10 million shares by September 2025. He maintained an ‘Underperform’ rating with a $40 target.
Overall, 18 Wall Street analysts at TipRanks maintain a ‘Hold’ rating on Palantir. They forecast an almost 5% downside over the next 12 months and an average price target of $92.
Why Wall Street could be wrong on Palantir stock
Although some Wall Street analysts raise legitimate concerns about the fundamentals that could impact Palantir’s price growth, other factors suggest the stock could rally once the current market downturn ends.
Hints of Palantir’s future potential can be retrieved from its Q4 2024 earnings, where revenue surged 36% year-over-year, driven by a 43% increase in its customer base.
The trend will likely continue, considering that Palantir is expanding its client base. Estimates indicate that the American technology giant will see a 31% revenue increase this year, beating Wall Street expectations. Speaking of clients, Qualcomm (NASDAQ: QCOM) and Epirus have also joined the Colorado-based company’s roster.
One key catalyst to watch is Palantir’s push to diversify away from its reliance on government contracts, shifting more focus to the private sector. While government clients made up 42% of revenue in 2024, Palantir’s private-sector push is accelerating growth. Additionally, its Artificial Intelligence Platform (AIP) is gaining traction, automating tasks and attracting new and existing clients.
Furthermore, partnerships are playing a crucial role. Palantir’s recent alliance with competitor Databricks is a standout collaboration that aims to strengthen AI and data analytics capabilities. The partnership seeks to provide an open, scalable data architecture, further expanding Palantir’s market presence.
Indeed, if these fundamentals play out, Palantir will be well-positioned to offset any impact from the projected Department of Defense budget cuts, which remain a key concern for the firm.
Featured image via Shutterstock
