3 Reasons Why Palantir (PLTR) Is a Hold, According to Analysts

Palantir (PLTR) has been making the headlines for quite a while, and for good measure. Its stock has enjoyed itself for the last year, having climbed over 150% and over 153% year-to-date; last quarter’s results were impressive, and the company has recently been welcomed onto the S&P 500, declaring it officially one of the biggest software companies in the world. So, after all the good news, why is PLTR stock a Hold, according to the Wall Street analysts?

If you want to read more about Palantir, you can see what our writer at Tipranks, Micheal Byrne, had to say about the stock right here. For this article, though, let’s explore very shortly why analysts do not share the enthusiasm surrounding Palantir:

• Sky-high Valuation: The source for all the skepticism is the stock’s high valuation, which is a major concern for investors. PLTR trades at an overwhelming price-to-earnings ratio of 116.6x. The S&P 500, for example, trades at a multiple of 24.4, while Nvidia trades at 46.6 times its earnings. This high valuation offers little margin for error, and every misstep could become detrimental.

• Insider Selling Signals Caution: Key insiders, including co-founder Peter Theil and CEO Alex Carp, have sold a large chunk of shares. To be more precise, Thiel has sold over $1 billion worth of shares, while Carp has sold 9 million shares for $36.18. Now, it all could be just a natural desire to profit from the hard work put into the firm, but for the analysts, it signals that maybe the stock has reached its ceiling.

• Analysts Are Suspicious, and So Is Tipranks’ Smart Score: Tipranks’ smart score rates each stock between 1 and 10 based on eight key market factors. 1-4 ratings equal Underperform, 5-7 ratings equal a Neutral position, and 8-10 ratings reflect an Overperform rating. On Tipranks’ smart score, PLTR stock receives a rating of four, with two key factors lowering the stock’s ratings: decreased hedge fund trend and insider transactions.

Wall Street Analysts Take on PLTR

Analysts remain skeptical despite PLTR’s recent achievements, including a fresh multi-million contract from the U.S. Army and another multi-million contract from the private sector with Nebraska Medicine. PLTR stock is rated a Hold on Wall Street, with 4 Buys, 6 Holds, and 6 Sells. The average price target of PLTR stock is $27.67, reflecting a -36.41% downside.

See more PLTR analyst ratings

Takeaway

Palantir is a software company that is surrounded by great excitement. Its last quarter’s results were impressive, and recently, it entered the S&P 500 index. Moreover, its contracts with the U.S. Army and the private sector ensure sufficient cash flow for the near term. However, its over-the-top valuation makes the stock a risky bet for investors and leaves little room for error for the company. As a result, many analysts do not think this high valuation is sustainable.