It is hard to find adequate superlatives to describe the past few years for Palantir (NASDAQ:PLTR) stock. Since the beginning of 2023, PLTR’s share price has surged upwards by more than 2,700% as the company has turned into one of the biggest winners of the AI revolution.
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Founded with an eye on serving the U.S. security and defense sector, Palantir has now grown beyond this initial target audience and boasts a wide variety of clientele in both the U.S. and abroad. For instance, during its last quarter, Palantir’s U.S. commercial revenues surged to $306 million, up 93% year over year. Looking overseas, the company has also inked deals with the North Atlantic Treaty Organization and the United Kingdom’s Ministry of Defense.
So, after such a dramatic climb, could Palantir consider a stock split to make its $180 share price more approachable? Investor Bram Berkowitz weighs in.
“Given its rise, Palantir, in theory, could conduct a stock split if it wanted to lower its share price, but I don’t see a compelling reason to do this,” the 5-star investor explains.
The investor notes that stock splits are often used to create liquidity for companies, as lower prices often encourage greater trading. Berkowitz points out that the market is already head over heels in love with PLTR, so that’s not exactly a convincing argument.
In fact, the biggest issue that most investors have with PLTR is its sky-high valuation, as the company trades at 279x its Forward Price-to-Earnings ratio. However, a stock split doesn’t alter valuation ratios, reminds Berkowitz.
“Palantir’s stock price doesn’t necessarily feel out of reach, and I’m not sure a split would accomplish much in terms of the problems that investors have with the company’s valuation,” adds the investor.
There are other larger worries floating around, Berkowitz mentions, including by some who are openly fretting that the white-hot AI stocks are creating a bubble that is reminiscent of the 2000 Dot-Com bust. A stock split wouldn’t address this concern either.
“A stock split isn’t going to impact Palantir’s future one way or the other. The company could do one, but certainly doesn’t need to,” sums up Berkowitz. (To watch Bram Berkowitz’s track record, click here)
Wall Street is on the fence when it comes to PLTR. With 13 Holds outnumbering 5 Buys and 2 Sells, PLTR carries a consensus Hold (i.e. Neutral) rating. Its 12-month average price target of $158.39 implies ~12% downside from current levels. (See PLTR stock forecast)
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Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.