TLDR
- Palantir stock has surged 492% over the past year, with shares trading near record highs at around $143
- Top investor The Value Portfolio rates PLTR a sell, calling the stock “much too much” with P/E ratios over 200x
- Friday’s Russell index reconstitution could create trading chaos as PLTR moves into top 200 large-cap names
- Commercial customers have exploded from 14 to over 430 in four years, driving record contract values
- Wall Street consensus remains neutral with a Hold rating and $104 average price target, suggesting 28% downside
Palantir Technologies stock continues its relentless march higher, but not everyone is celebrating the AI company’s meteoric rise.
The data analytics firm has delivered eye-popping returns of 492% over the past 52 weeks. Shares currently trade around $143, just 1.1% below the recent peak of $144.86 hit on June 16.
This year alone, PLTR has climbed 89.4%. That crushes the Dow Jones Industrial Average’s modest 1.2% gain over the past three months.
Veteran Investor Sounds Alarm
The Value Portfolio, a top-rated investor who has championed PLTR for years, recently threw in the towel. The 5-star analyst issued a rare sell rating on the stock he once called his “top tech pick of the 2020s.”
“The company has great assets in a high-demand industry, but its valuation has already priced in a substantial portion of the upside,” The Value Portfolio explained. The investor ranks among the top 2% of all TipRanks stock pros.
The warning centers on Palantir’s stretched metrics. The stock trades at more than 200x earnings and over 100x sales.
Even more eye-catching is the forward earnings multiple of 240x. The Value Portfolio argues these ratios have already baked in years of stellar growth.
“We now view the company as overvalued,” the investor concluded. “We recommend that investors either hold or sell a portion of their investment.”
Wall Street analysts seem to share some of that caution. The consensus rating sits at Hold with an average price target of $104.27.
That target implies roughly 28% downside from current levels. The analyst breakdown shows 3 Buy ratings, 10 Holds, and 4 Sells.
Russell Reconstitution Creates Wild Card
Friday brings a potential curveball for PLTR shareholders. FTSE Russell will conduct its annual benchmark index reconstitution.
Palantir’s massive gains mean it will likely jump into the top 200 large-cap names in the Russell 1000. Steven DeSanctis at Jefferies expects this shift to trigger an 11.1% drop in the technology sector weighting for the Russell midcap growth index.
About $10.6 trillion tracks Russell US indexes according to FTSE Russell. Last year’s reconstitution saw nearly 2.9 billion shares worth $95.257 billion trade in under one second.
Melissa Roberts at Stephens Inc estimates this year could generate $150 billion in net trades. DeSanctis warns that Palantir faces the heaviest selling pressure from passive managers during the transition.
Fund managers must rebalance portfolios to match new weightings. This forced buying and selling often creates short-term price swings.
The company’s transformation story remains compelling despite valuation concerns. Four years ago, Palantir served just 14 U.S. commercial customers.
That number now exceeds 430. U.S. commercial contract value jumped 183% in the recent quarter to a record $810 million.
The launch of Palantir’s Artificial Intelligence Platform two years ago supercharged commercial demand. Companies want AI-enhanced data analysis for supply chain optimization and maintenance scheduling.
Government revenue stays strong too. Military and intelligence agencies continue expanding software use for battlefield analysis and counterterrorism work.
Management raised full-year forecasts for revenue, adjusted income, and free cash flow in the latest quarter. Loop Capital’s Mark Schappel recently lifted his price target to a Street-high $155.
Palantir’s market cap now tops $330.2 billion, placing it firmly in mega-cap territory. The stock has traded above its 200-day moving average for the past year and stayed above its 50-day average since late April.
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