Data analytics and artificial intelligence (AI) company Palantir Technologies (PLTR 1.65%) has been one of the hottest growth stocks to own over the past couple of years. Since 2023, it rose by around 1,200%, which dwarfs the 680% gains that chipmaker and AI giant Nvidia has amassed during that same stretch. Palantir joined the S&P 500, and it's now part of the even more exclusive Nasdaq-100 index.
But if you were to go off of analyst price targets, you'll see that the consensus target today is just $74.79. Palantir flew past that on its way to a high of more than $125 earlier this year. Are analysts just flat out wrong about the stock, and could Palantir still be a good buy after its recent dip in price?
NASDAQ: PLTR
Key Data Points
Palantir's price targets have been rising
Although the consensus analyst price target may seem low, individual analysts have been bumping up their targets for the stock. Six of the 10 most recent price targets for Palantir have been above $100, seeming to imply that many analysts see the stock bouncing back from its recent fall in value; its trading for less than $85 at the time of this writing. Based on that, you might expect to see at least 17% upside for the AI stock right now. As analyst price targets go up, the consensus (which is an average) will also rise.
Analysts routinely upgrade their price targets, usually after there is significant news, including an earnings announcement. And that's what happened in early February after Palantir posted its latest earnings numbers, which showed the company's growth rate accelerated yet again. Demand for its AI-powered platform remains robust, as sales for the last three months of 2024 totaled $827.5 million and rose by 36% year over year. In the previous quarter, its year-over-year growth rate was a more modest 30%.
Why setting a price for the stock may be difficult
Palantir isn't as risky as a meme stock, but there's no doubt that there's a lot of speculation, hype, and excitement pushing its valuation higher these days. Perhaps investors are expecting its growth rate to continue to soar as Palantir reaches new government and commercial customers. But even if you consider its strong growth prospects, it can still be difficult for analysts to find a way to set a reasonable price target for the stock given how significant of a premium investors are paying for it right now.
Currently, the stock is trading at around 436 times its trailing profits. To put that into context of how expensive that is, here's a look at other tech companies which trade at 100 times their trailing profits. I've filtered this chart to include only stocks which have market caps in excess of $100 billion.
PLTR PE Ratio data by YCharts.
Given how much euphoria seems to be around Palantir, it's incredibly difficult for analysts and investors who rely on any kinds of valuation metrics and multiples to determine where Palantir's stock may go. But one thing is for sure: This is an extremely expensive stock to own.
Palantir is soaring today, but that could quickly change
Shares of Palantir have fallen by more than 33% in less than two weeks' time. News of tech giant Microsoft cancelling some AI data center leases may have spooked AI investors. That underscores the danger with Palantir's stock because as quickly as it has rallied, it could give back its gains just as fast.
I think analyst price targets are wrong about Palantir, but that's because they still look far too bullish given the results the company has achieved thus far. The stock's recent fall in price shows how volatile it can be since speculation plays such a significant part of its valuation. Unless you have an extremely high risk tolerance, you're likely better off avoiding the stock even with its recent dip in value. There are far better priced AI stocks to buy than Palantir.
