Investing

Stock Price Prediction: Why a Wall Street Analyst Is Wrong About Palantir

Gerelyn Terzo

Published: June 25, 2024 3:43 pm

Investors often allow on the guidance of Wall Street experts to influence their buy, sell and hold decisions. However, analysts are only human and can sometimes get it wrong. That’s why it’s important for investors to also perform their own research and formulate an analysis of their own on companies like enterprise software stock Palantir (NYSE: PLTR), which is the target of a bearish call.

PLTR stock has skyrocketed 264% in the past 18 months, which is sure to turn some heads. However, in the current bullish equities environment, coupled with Palantir’s AI prowess, government contract wins, and solid fundamentals, the stock has multiple tailwinds propelling it ahead. While software-as-a-sector may be getting punished of late, Palantir has demonstrated it’s in a class all its own. 

Bulls vs. Bear 

Wall Street firm Monness, Crespi, Hardt & Co. has come out swinging against Palantir stock. The analyst, Brian White, downgraded PLTR from a “hold” rating to a “sell” rating. Adding insult to injury, White assigned a price target of $20 per share on the stock, reflecting 17% downside potential from Palantir’s current price of just over $24 per share.   

In his scathing report, White asserts that Palantir’s valuation is “gluttonous,” considering the beating that much of the software sector has taken this year, owing to uncertainty around their relevance in the age of generative artificial intelligence.

Palantir’s triple-digit percentage run has not only left other software stocks in the dust since early 2023 but it has also outperformed the broader S&P 500 index by a mile, which appears to have White miffed. How could Palantir be trading at 17.5x his 2025 sales estimates when other stocks in his universe, for which he has more bullish revenue forecasts, are trading at half of that multiple? Rubbish, according to White, who also believes that the “darkest days of this economic quagmire are ahead of us.” 

Somebody might want to tell his peers, who have a median price target of $22 per share on Palantir stock with a resounding “outperform” rating. Among them, Argus Research is the most recent addition where analyst Joseph Bronner initiated coverage with a “buy” rating and a whopping $29 price target, suggesting the stock should be trading 20% higher than it is. 

Bank of America is also smitten, having added Palantir stock to its “Global Best of Breed List” for Q3 2024, alongside stocks like Nvidia (Nasdaq: NVDA) and AMD (Nasdaq: AMD).

While bearish White concedes that Palantir “is well positioned to benefit from the AI trend and capitalize on volatile geopolitics,” he can’t get over what he considers an “extreme” valuation in an uncertain time for software despite the fact that the rest of Wall Street is not the least bit fazed, given Palantir’s advantageous position (a growing list of government agencies and companies use its AI tools.)

In Q1, Palantir, which was co-founded by billionaire venture capitalist Peter Thiel, reported a profit of $106 million, the biggest quarterly profit since the company’s inception and despite the harshest critics. Revenue increased by 21% year-over-year to $634 million while the company holds cash, equivalents and short-term U.S. Treasuries of $3.9 billion on its balance sheet. The company also raised its full-year revenue guidance to a range of $2.677 billion-$2.689 billion.