Shares of Palantir (NASDAQ:PLTR | PLTR Price Prediction) are starting to look oversold again after giving back much of the recovery gains enjoyed going into March. Undoubtedly, it did not take long for shares of the AI software firm to go from a winner amid the Iran war due to its role in national defense to a laggard again.
And while the technical picture certainly does not look good with the stock down around a third from its highs, with Dr. Michael Burry likely looking at bearish put options that are starting to move further into the money, I do think that the sell-side analyst crowd is standing rather firm with buy ratings and price targets on the name. Perhaps there is nothing more discouraging for an investor than to witness a flood of analysts racing to downgrade recommendations and price targets after a sizeable move lower.
In any case, several notable analysts see the potential for heightened gains in the fallen AI analytics darling over the year ahead. Most notably among them, perhaps, are Citi’s Tyler Radke and Wedbush’s Dan Ives, who are hanging onto their $260.00 and $230.00 price targets, respectively, despite the recent rollover in the stock. At these levels, the target of Radke and Ives implies a gain of 89% and 68%, respectively, from here.
Palantir set a high bar for itself
That’s a massive implied gain that’s only going to keep swelling with every step lower than shares of Palantir take. Undoubtedly, things couldn’t be going better for Palantir’s AI Platform (AIP) as the firm looks to show the world how AI monetization is done right.
Still, what price is too high for such a hyper-grower? And will Palantir be one of the very few AI software success stories? Or is it just early to a boom that could act as a rising tide for the rest of AI-driven software? It’s hard to say right here.
Radke seems to view Palantir as the “enterprise AI standard.” In many ways, it’s the gold standard, and it may stay that way for some time. Ives has famously labelled Palantir as the “Messi of AI,” and holds a bullish long-term outlook, with expectations for the firm to join the $1 trillion market cap club at some point in the next few (three or so) years. If Palantir really is the “Messi,” there might be no catching the firm as it extends its reach.
Whether Palantir evolves into the “operating system” of the battlefield and corporate executives is the big question. If it can maintain its AIP momentum and the recent correction in tech exhausts itself (if the Iran war concludes in a matter of weeks instead of months and oil plunges quickly, Palantir and the rest of tech might be headed for a violent rebound), I think a 90% upside target starts to look incredibly realistic.
The path ahead could stay choppy. It might be better to look elsewhere for gains
Of course, until the conflict in Iran resolves itself, the market might continue to markdown stocks across the board, including the growth plays that are continuing to post jaw-dropping numbers. At the same time, there are skeptics who see shares as wildly overvalued and at risk of a substantial drawdown as tech valuations continue to come in.
With the market in a, more or less, fairly-valued spot after the latest broad correction, there are definitely AI names out there that provide growth at a heavy discount.
Personally, I’m not sure if the bears who shout “overvaluation” or the bulls who praise the name as one of the greats for its AI monetization and unprecedented tailwinds will be proven right. And that’s why I’m staying on the sidelines.
The market isn’t forcing you to join a camp. At a time like this, there are high-upside AI software titans, with, in my opinion, far lower multiples and downside risks. Say a Microsoft (NASDAQ:MSFT) at 18.6 times forward price-to-earnings (P/E) looks more enticing than Palantir at close to 222.0 times trailing P/E.
In short, a 90% gain might be realistic for Palantir, but the same could be said of far-cheaper stocks, which might carry far less in the way of risk at a time like this.
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