Palantir (NASDAQ:PLTR) stock is now considered by some to be in “nosebleed territory” – a term that comes from the idea that when you’re at a very high altitude, like in the mountains, you might get a nosebleed. In finance, it suggests the price has risen so much that it may now be risky or overvalued at current levels.
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That’s precisely the concern raised by top investor JR Research, who argues that “Palantir’s valuation has reached stratospheric levels on AI zeal, leaving arguably no room for any disappointment.” Indeed, with the stock surging 422% over the past year and by 1310% over the last 3 years, it’s an argument often made about this high-flying AI name.
However, this perspective is regularly met with pushback from PLTR supporters, who point to the company’s impressive growth trajectory and its pivotal role at the forefront of game-changing technology. They highlight Palantir’s ability to secure major deals in both government and commercial sectors as evidence of its staying power.
In fact, in a world where geopolitical risks are ever-present, Palantir’s products have become a go-to solution for many government entities. The company offers advanced data integration, real-time intelligence, and situational awareness – capabilities that are increasingly essential for national security, defense, and crisis response.
JR acknowledges these strengths, noting, “As an AI platform I believe the key message about unifying data into Palantir’s platform cannot be further emphasized. While proprietary data is the new fuel to power the digitalized environment, Palantir helps these organizations to overcome the ‘fractured data landscapes,’ and assist them in making sense of it to deliver actionable outcomes.”
Yet, despite these advantages, JR’s primary concern, as mentioned, returns to valuation. PLTR’s forward EBITDA multiple of more than 174x “really offers no room for hiccups.” Not only is this figure well above the tech sector median of 15.3x, but it also far exceeds the software industry median of 21.2x, raising questions about how much future growth is already priced in.
To further underscore this point, JR points to the PEG ratio (Price/Earnings to Growth) as a useful metric for assessing whether Palantir’s future prospects are already fully baked into its share price. With a PEG ratio of 7.4 – strikingly higher than the tech sector median of 1.9 – the market is clearly assigning a hefty premium to Palantir’s growth story. For this to be sustainable, investors would need to believe the company can “scale revenues even faster than before,” likely pushing well beyond a 30% annual revenue pace through 2027. Otherwise, the current premium starts to look increasingly difficult to justify.
Given these sky-high expectations and limited margin for error, JR cautions against letting greed take over. In his view, the rally is likely to lose steam, and he suggests that investors should “consider taking their positions off.”
As a result, JR, who is among the top 1% of TipRanks’ stock pros, rates PLTR shares a Sell. (To watch JR Research’s track record, click here)
Wall Street view is hardly bullish either: based on a mix of 9 Holds, 4 Sells, and just 3 Buys, the stock earns a Hold (i.e., Neutral) consensus rating. Meanwhile, the $105.29 average price target points to a potential one-year slide of 26%. (See PLTR stock forecast)
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Disclaimer: The opinions expressed in this article are solely those of the featured investor. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.