There’s no doubt Palantir (NYSE:PLTR) has been one of the past year’s biggest success stories. That is evident by the 191% returns delivered by the shares, of which 43% have been generated in 2024.
The share price growth has been attributed to Palantir’s participation in the biggest game in town: AI. Last year, the big data specialist launched AIP, its Artificial Intelligence Platform, which integrates AI across all stages of the data funnel.
The product’s launch has helped address an issue that fueled the PLTR bear case: namely, the company’s reliance on government contracts and potential difficulties in penetrating the commercial sector.
However, assessing its growth prospects as favorable, in January, the investor and stock researcher, Value Edge, sensed that PLTR stock was still undervalued and initiated a Buy rating on the shares.
Fast forward to early February and the release of Palantir’s Q4 print, and that analysis turned out correct. Palantir’s results and commentary showed that the reaction to the AIP product has been extremely positive and that Palantir is making meaningful strides in ramping up its commercial business. That was particularly evident in the U.S., where commercial revenue increased by 70% year-over-year to $131 million. Meanwhile, the U.S. commercial customer count increased by 55% from the same period a year ago to 221 customers.
“The growth trends presented are extremely compelling and the business model is straightforward,” Value Edge notes. “Management is focused on execution, increasing the pace of customer acquisition, and growing Palantir’s TAM (total addressable market).”
For the full year 2024, Value Edge anticipates U.S. commercial revenue will surpass $640 million, amounting to a growth rate of at least 40% and representing an acceleration on the 36% U.S. revenue growth seen in 2023.
So, strong prospects for the year ahead, too. Yet, if that all sounds like a strong recommendation to pick up PLTR shares right now, think again. The problem is that since that Q4 report, the shares have kept piling on the gains, and they no longer present a compelling case for loading up, according to the investor.
“The current Palantir stock price is far too steep a price to pay even with bold growth estimates,” says Value Edge. “For that reason, I am downgrading Palantir to a Hold. Management will need years of expectation beating growth and flawless execution to warrant the current valuation.”
That said, Value Edge also stresses that while the valuation is “too steep,” Palantir still represents a “great core holding for a long-term portfolio.”
“Concurrently,” the researcher sums up, “I believe there will be much more attractive opportunities to buy this company in the future. Stay patient for now, the opportunity to accumulate more Palantir stock will present itself eventually.”
Turning to the expectations of Wall Street and the analyst consensus also rates the shares a Hold, based on a mix of 6 Holds, 5 Sells and 2 Buys. Most also think the shares are now too expensive given the $19.64 average target factors in a one-year decline of ~21%. (See Palantir 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.
