Palantir Technologies (NASDAQ: PLTR) has been a company of particular interest among both investors and tech aficionados since acquiring several high-profile contracts from various governments going back to the mid-2010s.
However, it hasn’t exactly been smooth sailing since the company’s long-anticipated 2020 initial public offering (IPO). Having debuted at a share price of $10 in September 2020, PLTR stock rapidly rose to a $35 all-time high in January 2021 before entering a significantly lengthy downtrend.
From April 2022 to April 2023, Palantir stock even traded below its initial $10 initial offering price.
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Since then, PLTR’s stock price has steadily recovered — it is up 88.33% year to date (YTD), and although it is still some 12.9% away from its vaunted all-time high as of press time, investors have their minds set on an even loftier goal — is Palantir’s long-awaited big break coming, and will the stock climb as high as $50?
Is Palantir’s rise sustainable?
Sustainability has been a continual worry when it comes to PLTR. Although the company’s platforms and services saw relatively widespread adoption by governments across the globe, investors were apprehensive.
First and foremost, the company’s reliance on those same government contracts was seen as problematic. While no one would claim that this is a bad thing in and of itself, investors were worried that the company was effectively “pigeonholing” itself into a single, dominant revenue stream — one that would be vulnerable to competition and disruption.
These weren’t unfounded worries, either — historically, PLTR’s revenue was reliant on government contracts, although that tide has begun to shift somewhat.
Is Palantir diversifying?
The company’s latest earnings report, published on August 5, noted an 83% year-over-year (YoY) increase in US commercial customer count, as well as a 55% YoY increase in commercial revenue.
While that seems promising at first glance, especially when contrasted with the fact that the overall customer count grew by 41% YoY and that government revenue grew 23% YoY, taking a closer look at the data shows that Palantir’s momentum in the commercial sector might be running out of steam.
That closer look consists of paying attention to quarter-over-quarter changes. From that perspective, commercial revenue only grew 6%, while commercial customer count only rose by 13%.
Looking at US government-related revenue, the latest report saw an 8% quarter-over-quarter increase — while overall government revenue rose 11% quarter-over-quarter. While these are solid results overall, they do lend credence to the stance that Palantir’s efforts to diversify revenue streams away from governments have lost some steam.
As an aside, the company’s dealings with intelligence communities have run into public pushback concerning privacy and surveillance — with some governments even rethinking established partnerships with the company altogether.
Palantir stock price prediction for 2024
On the whole, Wall Street experts are significantly bearish concerning Palantir’s future prospects. Apart from the aforementioned dependence on government contracts, the company’s high valuation (currently trading at a forward P/E ratio of 73.2) suggests that other, less risky investments could easily be more appealing.
Wall Street analysts echo these sentiments — while the most bullish forecasts set price targets at $38, which would represent a 21.52% upside from the stock’s current price of $31.27, those estimates are far from $50 — and also far from the general consensus.
In fact, of the 14 financial specialists tracking the stock, only 3 deem it a ‘buy’ — a fact easily overshadowed by 5 hold ratings and 6 sell ratings. The average price target for the next 12 months is just $25.42 — amounting to a 19.25% decrease in stock price. On the more pessimistic end of the scale, some forecasters even see the stock dropping to as low as $9.
All in all, Wall Street researchers rate the stock a ’hold’ — and even the bullish among them have set price targets significantly removed from $50. To answer the question we posited, the answer is “unlikely,” at least in the next 12 months.
Disclaimer: The content on this site should not be considered investment advice. Investing is speculative. When investing, your capital is at risk.
