Palantir Technologies (NASDAQ:PLTR) poses quite the conundrum for investors: a company that is clearly clicking on all cylinders, but with a valuation far and above its peers.
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Thus far, Palantir bears have had to eat their hat, many times over. Despite repeated warnings of overvaluation, the company’s share price has galloped upwards by some 370% during the trailing twelve months.
By the numbers, it is very hard to poke holes in Palantir’s story of success. The company continues to show dramatic gains in revenues and clients, and boasts an astonishing Rule of 40 score of 94 (48% revenue growth and 46% adjusted operating margin). And, PLTR shows no signs of slowing down, guiding for its “highest sequential quarterly revenue growth” in Q3, in the words of CEO Alex Karp.
Still, the company’s valuations are, to put it bluntly, out of this world. By any conceivable metric, PLTR is trading far and above its sector average – often by greater than 1,000%. That’s a problem for many a would-be investor.
Though he acknowledges the company is “thriving,” investor Bohdan Kucheriavyi suggests waiting a bit before acquiring any more shares.
“Despite stellar fundamentals, PLTR stock is highly overvalued, trading at 90x forward earnings, and is now mostly dependent on macroeconomic factors,” explains the 5-star investors.
Kucheriavyi needs no additional convincing that the company’s “aggressive growth” will continue apace, noting that in Q2 PLTR grew its customer count by 43% year-over-year, increased its U.S. commercial revenues by 93% year-over-year, and has already announced a number of new deals in the current quarter. In addition, the company is making strong inroads in Europe, having sold its Maven Smart System to NATO a few months back.
And yet, the investor now believes that the company’s achievements will be secondary to larger trends going forward. He spots parallels with Tesla’s performance a few years back, when that company’s “exuberant multiples” only started to come down when the Fed raised interest rates and the Russia-Ukraine fighting began.
While Kucheriavyi remains long with PLTR, he is not planning on adding to his position anytime soon.
“I would wait for the potential major pullback caused by some macro development before increasing my stake in Palantir,” concludes Kucheriavyi, who gives PLTR a Hold (i.e. Neutral) rating. (To watch Bohdan Kucheriavyi’s track record, click here)
That seems to be the general view on Wall Street as well. With 13 Holds – and 4 Buys and 2 Sells – PLTR is has a consensus Hold rating. Its 12-month average price target of $154.47 has a downside of close to 10%. (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.