Palantir Technologies Inc. stock fell from a record high on Thursday, even though buyers have been putting a lot of money on the software company’s role in the growth of AI.
Stock prices have gone up so much that even the most optimistic Wall Street analysts didn’t see this coming by a long shot.
The company Palantir PLTR -0.29% makes software that helps the government and businesses use AI to look at a lot of data.
Many people may call Nvidia Corp. NVDA -0.21% the AI leader because it has the most AI chips on the market. However, Palantir has been an AI investment favorite, and some AI hardware names have been moved into software to help it grow.
This was the first drop of 0.2% in Palantir’s stock since October. It had been three straight record ends before this. This year, it’s closed 22 times at a new high.
Palantir’s market value has grown to $188.1 billion, and the stock has been by far the best winner in the S&P 500 index SPX -0.04% this year. It has gone up 380.9% so far this year. Nvidia shares have gone up 181.7% this year, which has made the market value of the company $3.4 trillion.
Stock prices in Palantir have gone through a parabolic rise, but Wall Street experts think this has a cost.
The stock has an outperform rating from Wedbush and a Wall Street high price target of $75. On Thursday, Ives told clients in a note that he still thinks AI spending will “ramp significantly” in company budgets in 2025.
In reference to Lionel Messi, whom many people think is the best football player of all time, he called Palantir “the Messi of AI.”
During the AI Revolution, Palantir has been a major focus. Its flagship products are being used in more areas, which has led to a bigger partner ecosystem and quickly rising demand for enterprise-scale and enterprise-ready generative AI, Ives wrote.
But because the stock price has gone up this year, even someone as bullish as Ives might be seen as gloomy by some.
Only three of the 22 experts that FactSet polled who follow the stock are bullish. Seven are bearish, and 12 are neutral.
Ives’s $75 goal is the highest of the people surveyed, but it still means a 9.1% drop from where things are now.
FactSet says that the average price target for analysts is $44.87, which is 45.6% less than where the stock is now.
The case against the stock isn’t about the company; it’s about the price of the shares.
Gregg Moskowitz of Mizuho told clients in a recent note that Palantir’s stock should be worth more because the company has won “impressive” contracts and done great business, but the present prices are higher than even the most optimistic forecast.
Many people think that price shouldn’t matter, but Moskowitz recently wrote, “We find it increasingly difficult to justify [Palantir’s stock’s] high multiple that already discounts material acceleration and upside versus consensus expectations.”
FactSet says that Palantir’s stock is worth 176.5 times what it is expected to earn per share over the next 12 months and 53.6 times what it is expected to sell.
That is different from Nvidia’s stock, which has a price-to-earnings ratio of 32.6 and a 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.
