Palantir (PLTR) shares are continuing their strong performance in 2024, showing impressive growth. The AI software company, led by CEO Alex Karp, has seen a 41% increase in its stock value so far this year, outpacing the Nasdaq Composite (^IXIC) which has only advanced by 3%. On Thursday, shares surged by 5% to reach a new all-time high. Palantir has outperformed other top companies, with Meta (META) being the closest competitor, having a 20% increase this year. “The company is experiencing significant momentum currently,” commented a Wall Street analyst. The company’s financial results reflect the excitement surrounding its stock, as it reported a 52% surge in fourth-quarter US revenue compared to the previous year. Sales to commercial and government clients also saw substantial increases. Adjusted operating profit margins rose to 45% from 34% a year ago, nearly doubling to $1.13 billion in 2024. During an earnings call, Karp expressed pride in Palantir’s contribution to American enterprises and emphasized their commitment to national interests. Following the earnings report, Wall Street analysts have raised their EPS expectations for 2025 and 2026, reflecting a positive outlook. Despite some skepticism from analysts about Palantir’s valuation and volatility, some analysts believe in its growth potential, likening it to companies like Oracle or Salesforce. Wall Street research shows varying opinions on Palantir’s stock, with some analysts justifying its valuation based on the company’s unique growth story in the software sector.
The recent performance of Palantir led to our decision to maintain an underweight rating. However, a fundamental aspect of growth investing in the software sector is to initially evaluate whether a business is improving or deteriorating before delving into its valuation. Specifically, it is essential to ascertain the sustainability of any improvements observed. Against this backdrop, it is evident that Palantir showed signs of improvement in the fourth quarter. Nonetheless, the valuation of Palantir’s stock presents a significant challenge. Despite the positive financial indicators, the stock’s valuation has given analysts reason for pause. Gil Luria from DA Davidson shares this sentiment, although he has adjusted his price target to align with the current market price. He acknowledges Palantir as a compelling story within the software industry, highlighting the company’s exceptional performance according to the Rule of X. However, the stock is trading at a considerable premium compared to its peers, with a valuation approximately 67 times the calendar year revenue. As a result, the Neutral rating is maintained, but the price target has been raised to $105, reflecting around 67 times the estimated revenue for the year 2025. Not everyone shares the same level of optimism regarding the sustainability of Palantir’s business model. RBC Capital Markets analyst Rishi Jaluria stands out as one of the more cautious voices on Palantir. Rather than focusing on valuation concerns, he expresses doubts about the long-term viability of the company’s recent achievements. Jaluria’s price target of $40 implies a potential decline of 68% from the current stock levels. He notes that while Palantir delivered a strong quarter and exceeded 2025 guidance expectations, there are lingering uncertainties regarding the growth trajectory and product differentiation. Despite the upward revision of estimates and improved profitability, Jaluria believes that the risk-reward balance is skewed unfavorably due to the stock’s premium valuation. The narrative surrounding Palantir’s future remains divided, with contrasting viewpoints shaping the market’s perception of the company.—Brian Sozzi is Yahoo Finance’s Executive Editor. Follow Sozzi on Twitter @BrianSozzi, Instagram, and LinkedIn. For story suggestions, contact brian.sozzi@yahoofinance.com. Click here for the latest technology news impacting the stock market. Read the most recent financial and business news on Yahoo Finance.
