The stock is the S&P 500’s biggest gainer this year with a near fivefold rally, while the average analyst price target was 46% below current levels.
Shares of Palantir Technologies Inc. slipped back from record territory Thursday, though investors have been betting aggressively on the software company’s role in the growth of artificial intelligence.
The stock has rallied so much that it has overshot the expectations of even the most bullish analysts on Wall Street — by a wide margin.
Palantir makes software that helps businesses and the government use AI to analyze large amounts of data.
NVIDIA may be referred to by many as the AI leader, as it dominates the market for AI semiconductors. But Palantir has been investors’ AI darling, and it’s been the beneficiary of some rotation out of AI hardware names into software.
Palantir’s stock dipped 0.3% on Thursday, snapping a streak of three straight record closes. It’s closed at a record high 22 times this year.
The stock has been by far the S&P 500 index’s SPX best performer this year, as it has skyrocketed 380.9% to date in 2024 to boost Palantir’s market value to $188.1 billion. Meanwhile, Nvidia shares have run up 181.7% this year to lift the company’s market capitalization to $3.4 trillion.
But the parabolic rally in Palantir’s stock comes at some cost, in the minds of Wall Street analysts.
Wedbush’s Dan Ives, who rates the stock outperform and has a Wall Street–high price target of $75, said in a note to clients on Thursday that he continues to expect AI spending to “ramp significantly” within corporate budgets in 2025.
He called Palantir “the Messi of AI,” referring to Lionel Messi, who many consider the greatest player of all time in world football.
“Palantir has been a major focus during the AI Revolution with expanding use cases for its marquee products leading to a larger partner ecosystem with rapidly rising demand across the landscape for enterprise-scale and enterprise-ready generative AI,” Ives wrote.
But given the stock’s rise this year, even someone as bullish as Ives might be considered by some to be, in fact, bearish.
Of the 22 analysts surveyed by FactSet who cover the stock, only three are bullish, while seven are bearish and 12 are neutral.
Ives’s $75 target is the highest among those surveyed, but that still implies 9.1% downside from current levels.
And the average analyst price target is $44.87, according to FactSet, which was 45.6% below current levels.
The bears’ case on the stock isn’t about the business; it’s about the stock price.
Mizuho’s Gregg Moskowitz said in a recent note to clients that, while Palantir’s stock deserves a premium valuation, given the company’s “impressive” contract wins and business execution, current prices have exceeded even the most bullish outlook.
“Valuation cannot and should not be irrelevant, and we find it increasingly difficult to justify [Palantir’s stock’s] high multiple that in our view already discounts material acceleration and upside versus consensus expectations,” Moskowitz wrote recently.
Palantir’s stock is trading at 176.5 times what is expected for earnings per share over the next 12 months, according to FactSet, and 53.6 times what sales are expected to be.
That compares with a price-to-earnings ratio for Nvidia’s stock of 32.6 and an Nvidia sales-to-earnings ratio of 17.9.
And, based on the current FactSet consensus estimates, Palantir’s EPS for 2025 is expected to be 23.7% above that of 2024, and sales are expected to grow 25.2%.
Meanwhile, FactSet estimates for Nvidia show EPS growth of 49.7% and a 52.9% rise in sales.