Palantir (NYSE:PLTR) has been one of the names riding the AI trend and the share gains have reflected investors’ optimism; the stock is up by 164% over the past 12 months.
However, in light of those big gains one bearish argument around Palantir is that the stock now commands an unrealistic valuation. But for investor Victor Dergunov, that take misses the point.
“Despite Palantir’s seemingly elevated valuation, it remains a top AI stock, often misunderstood and underrated by the market,” says the investor. “Therefore, Palantir’s stock could appreciate considerably throughout 2024, potentially reaching my $35-$45 price target range by year-end or early 2025.”
At the mid-point, that would represent gains of 78% from current levels. Dergunov backs his case with the strong growth seen in Palantir’s Q4 results, particularly the U.S. commercial segment, whose revenue haul increased by 70% from the same period a year ago. Moreover, the company also increased its 2024 full-year revenue guide to the range between to $2.65-$2.66 billion, above consensus at $2.64 billion.
With Q1 earnings about to hit, Dergunov also thinks Palantir will likely beat its revenue forecast of $612-$616 million and could raise the full-year outlook further given the recently announced partnership with Oracle. In fact, moving forward, being able to use Oracle’s distributed cloud and AI infrastructure could help fuel the growth of Palantir’s platforms.
“Considering Palantir’s enormous growth and profitability potential, I disagree that the stock has an egregiously rich valuation,” Dergunov goes on to say. “Moreover, I disagree that the generative AI cycle is at an unprecedented hype stage, but everyone is entitled to their opinion. Instead, I believe we’re likely early in the AI ballgame.”
As such, over the coming years, Dergunov believes Palantir could “continue commanding a relatively high valuation of around 50-65 forward EPS estimates.”
That, according to some “modest to base-case intermediate-term estimates,” could result in the stock reaching a price of $100 by 2030. To this end, Dergunov rates the stock a Strong Buy. (To watch Dergunov’s track record, click here)
However, differing opinions abound, with Wall Street’s consensus rating portraying a more cautious stance. The consensus, based on 6 Sell recommendations, 5 Holds, and just 2 Buys, rates the stock a Moderate Sell. The average target currently stands at $19.67, representing downside of 13% from the current share price. (See Palantir stock forecast)
To find good ideas for stocks trading at attractive valuations, visit TipRanks’ Best Stocks to Buy, a tool that unites all of TipRanks’ equity insights.
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.
