Inflated Valuation Concerns Lead to Downgrade of Palantir Technologies by Analyst

Palantir Downgraded Due to Inflated Valuation Amid AI Buzz

Analyst Brian White from Monness, Crespi, Hardt & Co., recently downgraded Palantir Technologies, the data analytics software maker, citing concerns over the company’s inflated valuation. The downgrade comes amidst a wave of excitement among investors regarding generative artificial intelligence, a reason behind Palantir’s surge in 2023. This surge has continued in 2024, where the stock’s upward trajectory has left the company with what is viewed as an excessively high valuation.

Palantir Stock Performance

Palantir’s stock, listed as PLTR, experienced a 4.5% decline to reach 23.41 on the stock market. As of the previous market close, the stock had surged nearly 43% in 2024. However, share prices have recently retreated from a high of 27.50, which was achieved on March 7.

The Rise of Palantir

Palantir, founded in 2003, has been successful in leveraging generative AI with its government customers, particularly in intelligence gathering, military operations, and counterterrorism. The company is now venturing into the commercial market, aiming to drive growth using generative AI. Palantir has expanded its operations into various sectors, including health care, energy, and manufacturing.

Generative AI models employ “prompts” provided by users, such as search queries, to autonomously create text, images, video, and code. While Palantir has not released specific pricing details for their AI products, they showcased their Artificial Intelligence Platform at a customer conference held on March 7. The platform, launched in early 2023, has gained traction among commercial customers, according to the company.

The Analyst’s Perspective

Brian White commented on the potential for Palantir to benefit from the long-term trend of AI and capitalize on volatile geopolitical situations. However, he raised concerns about the unpredictability of revenue from government contracts, sporadic execution, and an excessive valuation. White downgraded Palantir’s stock status to “sell” from “neutral” and assigned a price target of 20 for the stock.

Conclusion

Although Palantir has been a leader in AI adoption among government customers, the company’s valuation has seemingly outpaced its growth potential. The downgraded status reflects the need for a reevaluation of Palantir’s market positioning. As investors navigate the landscape of artificial intelligence and its implications, a balance between burgeoning technology and sustainable market growth becomes crucial.