Palantir (NASDAQ:PLTR) shares finished 2024 with a bang. Despite the recent plunge into a bear market (20% dip), shares remain up more than 137% in the past six months, around 312% in the past year, and a shocking 863% in the last two years. Undoubtedly, such an explosive melt-up would cause many rational, value-conscious investors to ponder if some sort of bubble has formed. Indeed, it’s hard not to view shares of Palantir as overvalued, at least in my humble opinion.

Though there are numerous justifications and growth drivers to support the hefty price of admission at current levels, I think the stakes and downside risks are just way too high to consider putting new money to work at north of $68 per share. As difficult as it is to walk away and admit one has missed it, Palantir stock stands out as a name to come back to at a later date, perhaps after a more severe correction has hit.

Palantir stock looks expensive, even after its latest New Year’s plunge.

In my opinion, it really doesn’t matter which angle you look at the stock; it looks wildly expensive on all fronts. At 340 times trailing price-to-earnings (P/E), shares look priced to perfection. Things don’t look a whole lot cheaper when you go by the forward P/E multiple (currently at 137 times) or price-to-sales (P/S) (nearly 60 times P/S).

So, other than sheer momentum and excitement for the company’s advanced artificial intelligence platform (AIP) and world of growth as the firm expands further into the enterprise from government contracts, I’m not so sure what can justify today’s lofty valuation metrics.

A number of Wall Street analysts covering the data analytics firm also view shares as running just a tad ahead of their skis. Jefferies analyst Brent Thill, a trusted pro on Wall Street, recently downgraded PLTR stock to “underperform” with a fairly low price target of $28 per share.

Such a target implies the name could shed more than half (around 59%) of its value from current levels. Thill doesn’t stand alone. We’ve seen a barrage of sell ratings arrive in recent weeks as PLTR stock showed a bit of technical weakness. With so many analysts bearish on the name, it’s hard to be constructive on a thesis at these prices. 

That said, there are some bull arguments to factor in before writing off the name for the year. Let’s look at two of them.

Palantir is a top dog in the fast-moving AI software scene.

There’s a lot of hype when it comes to AI stocks. And while many of the bid-up names may never prove their worth, I do believe Palantir is one of the firms that has a growth narrative that can support a pie-in-the-sky multiple. Indeed, big data is the name of the name in this inning of the AI ballgame, and with its AIP drawing in commercial clients, it’s really hard to tell when the peak in growth will be in.

It can be easy to underestimate the growth and economic moat width of an AI analytics software firm like Palantir in these very early days, especially since the applications and benefits of AI-driven data analytics are still somewhat lesser known. Should the firm make a bigger splash on the commercial side, perhaps a brighter light will shine on its AIP growth driver.

Like the great Nvidia (NASDAQ:NVDA), Palantir has a dominant AI product that firms may struggle to keep up with as the AI boom progresses into another year. Whether its dominance and positioning in the AI software boom is enough to power further gains remains to be seen.

Is the bar set high for Palantir in 2025? Most definitely. But of all the AI software innovators, the firm seems best able to grow into its obscenely high price tag.

Wall Street veteran sees upside ahead.

It’s lonely to be a bull on Palantir stock at these heights. However, Dan Ives of Wedbush Securities is not afraid to go against the herd with Palantir. He thinks the name is poised to be “the next Oracle (NASDAQ:ORCL)” in 2025.

As one of his top AI stock picks for 2025, it’s hard not to buy the man’s bull thesis for a name that many analysts have been so quick, perhaps too quick to turn their back on. If this is the year of AI software, as Ives believes, Palantir and its AIP could be in for another year of performance. 

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