Palantir Technologies Inc. (NASDAQ:PLTR) is among the most fantastic stocks every investor should pay attention to. The company has seen tremendous success in recent years, driven by its AI-led offerings. Its stock has gained 153% year-to-date and has more than tripled in value over the past year.
However, such a rally has now raised concerns about the balance between fundamentals and valuation. Palantir Technologies Inc. (NASDAQ:PLTR) reported impressive results and provided better-than-expected guidance for Q4 on November 3, supported by robust deal momentum. However, a day later, Raymond James maintained its cautious stance with a Market Perform rating, without assigning a price target. The analysts highlighted its rich valuation of 85x on price-to-sales as the primary reason for remaining on the sidelines.
A Bloomberg report from November 3 noted that the company’s valuation, based on the price-to-sales ratio, makes it the most expensive name on the S&P 500 Index. On a P/E basis, the company will be the fourth most expensive. Before the results, Morgan Stanley analyst Sanjit Singh had said: “Valuation is our big stumbling block. The most expensive I’ve seen in my career.”
13F filings from Scion Asset Management on November 4 revealed that Michael Burry, famous for his 2007 prediction of the US mortgage crisis, has now taken a bearish position in Nvidia and Palantir through put options, as he projects an impending AI bubble and expects the stocks to decline.
However, Palantir’s CEO, Alex Karp, defended his company in an interview with CNBC, arguing that fundamentals and growth speak louder than the claims of short sellers. He based his arguments on the impressive results, estimated growth in the coming years, and rising share prices as evidence of the company’s strength.
That said, the broader consensus appears to be cautious at present, as only one-fourth of analysts covering it have a Buy rating, with the 12-month median price target implying only a modest potential upside.
Palantir Technologies Inc. (NASDAQ:PLTR) is a software company that builds and deploys data integration and analytics platforms for both government and commercial clients.
While we acknowledge the potential of PLTR as an investment, we believe certain AI stocks offer greater upside potential and carry less downside risk. If you’re looking for an extremely undervalued AI stock that also stands to benefit significantly from Trump-era tariffs and the onshoring trend, see our free report on the best short-term AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.
