Palantir Technologies Inc. (NASDAQ:PLTR) has experienced significant stock appreciation, soaring 1575% over the past three years, prompting speculation about its potential to rival tech giants like Microsoft in the future. This remarkable growth is not purely speculative; it is underpinned by increasing revenues, strong profit margins, and a growing list of clients in both government and commercial sectors.
However, the surge has raised questions regarding the sustainability of Palantir’s high valuation. Analysts point out that, compared to its sector peers, Palantir’s stock trades at valuations that are vastly elevated, sometimes exceeding thousands of percentage points, suggesting that optimism may be overly inflated.
One investor, known as Hunting Alpha, believes that Palantir has the potential to become as big as Microsoft. He cites recent statements from company insiders claiming that Palantir is working on a project comparable to Amazon Web Services (AWS), which aligns with the company’s long-term vision. Despite this optimistic outlook, Hunting Alpha advises caution, indicating that Palantir’s current high valuation leaves little room for error.
He noted Palantir’s ontology platform as a crucial differentiator, essential for its success in tapping into the booming AI and data markets. Additionally, while the company currently serves fewer than 1,000 customers, it may be positioned for future growth. The investor highlights that the average revenue per customer may not fully capture the deeper engagement and increased usage from existing clients.
Despite recognizing Palantir’s strong execution so far, Hunting Alpha has opted for a more cautious position, rating the stock as a Hold, reflecting the prevailing sentiment on Wall Street: a consensus that includes 9 Holds, 3 Buys, and 4 Sells. Analysts suggest there could be approximately 28% downside from current prices, with an average price target of $106.71.
The broader message is one of tempered optimism, as while Palantir has showcased impressive growth, the market’s high expectations require the company to deliver on its potential to justify its stock price. Palantir’s journey forward could be promising, particularly if it can capitalize on its competitive advantages in the evolving tech landscape.