Palantir (NASDAQ:PLTR) shares have staged a strong comeback – after shedding 36% from February’s high, the stock has rebounded more than 20% in just under two weeks following its AI showcase, AIPCon 6.
The event delivered a burst of optimism for investors, as the company rolled out a series of fresh partnerships and highlighted real-world success stories that showcased the strength of its technology. For shareholders who had watched gains slip away, it was a much-needed boost.
That said, not everyone is convinced the storm has fully passed. While bullish on Palantir’s future, top investor Steven Fiorillo sees further losses looming before the stock regains steady ground.
“I think the current valuation is dangerous, and investors trying to chase PLTR’s momentum could get burned,” warns the 5-star investor, who sits in the top 1% of TipRanks’ stock pros.
Fiorillo spots a number of red flags that are giving him concern, such as the large portion of PLTR’s 2024 net income (42%), which was generated by interest on its cash reserves – a revenue stream that could shrink quickly if interest rates shift.
Another issue Fiorillo cites is the sharp rise in stock-based compensation (SBC). In Q4 alone, SBC as a percentage of revenue jumped from 19.63% to 34.05%, raising questions about cost discipline and dilution.
“I am hoping this is a one-time thing, but I don’t like being diluted, and seeing such an aggressive move higher during Q4 is alarming to me,” notes Fiorillo.
And if the valuation already looks risky at a glance, Fiorillo underscores it further by stacking Palantir against its peers. He calls the company’s pricing “insane,” noting that Nvidia – widely seen as the gold standard in AI – trades at just 17.77x projected 2027 earnings, while Palantir sits significantly higher at 91.03x.
“PLTR has done an excellent job of building software that provides value to its customers and executing its business plan, but that isn’t enough to remain bullish at the current valuation,” Fiorillo summed up, placing a Hold (i.e. Neutral) rating on the stock. (To watch Fiorillo’s track record, click here)
This seems to be where Wall Street finds itself as well. With 10 Holds to go along with 4 Buy and 4 Sell ratings, PLTR holds a consensus Hold rating. Its 12-month average price target of $92.13 implies the stock will be trading sideways in the year ahead. (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.
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