The Nasdaq-100 measures the performance of 100 large non-financial companies listed on the Nasdaq Stock Exchange. Year to date, the three best-performing stocks in the index are Palantir Technologies (PLTR 0.51%), Zscaler (ZS -0.64%), and MercadoLibre (MELI -2.25%) as of June 8. But forecasts from Wall Street show downside in two of the three tickers, as detailed below:
- Palantir stock is up 69% year to date. But the median target price of $100 per share implies 21% downside from the current share price of $127.
- Zscaler stock is up 68% year to date. But the median target price of $300 per share implies 1% downside from the current share price of $303.
- MercadoLibre stock is up 46% year to date. And the median target price of $2,875 per share implies 15% upside from its current share price of $2,485.
The median target prices listed above imply investors should sell Palantir and Zscaler, but buy MercadoLibre. Here are the important details.
Palantir Technologies: 21% downside implied by the median target price
Palantir develops in analytics software for commercial and government customers. Recently, the International Data Corporation (IDC) recognized the company as the leader in decision intelligence platforms, and Forrester Research ranked it as a technology leader in artificial intelligence and machine learning platforms.
Palantir announced encouraging financial results for the first quarter. Revenue increased 39% to $884 million, the seventh consecutive acceleration. And non-GAAP net income increased 62% to $0.13 per diluted share. Management also raised full-year guidance such that revenue is projected to increase 36% in 2025, citing demand for its artificial intelligence platform as a key tailwind.
Indeed, IDC estimates AI platform spending will increase at 41% annually through 2028, and Palantir is clearly top of mind for many businesses given the recent recognition from two independent research organizations. The only problem is valuation. Palantir is the most expensive software stock in terms of its forward price-to-sales (PS) ratio by a wide margin.
In fact, Palantir would still be the most expensive software stock if its price was cut in half, according to Brent Thill at Jefferies. "Even if you assume they were able to grow at 40% or 50% for the next five years straight, five years from now it would still be the most expensive name in software," he said. To that end, I think investors should avoid Palantir at the present time, and shareholders with large positions should consider trimming.
Image source: Getty Images.
Zscaler: 1% downside implied by the median target price
Zscaler operates the largest network security cloud. Its security service edge (SSE) platform modernizes corporate networks by inspecting web traffic and enforcing zero trust policies in the cloud rather than private data centers. That eliminates the need for expensive on-premises security appliances, and lets users quickly and securely access company applications and resources from any device or location.
Zscaler reported excellent financial results in the third quarter of fiscal 2025, which ended in April. Revenue increased 23% to $678 million and non-GAAP net income increased 18% to $0.84 per diluted share. Management also raised full-year guidance, such that revenue is forecast to increase 23% in fiscal 2025.
Consultancy Gartner recently ranked Zscaler as a leader in SSE platforms for the fourth straight year, and the SSE market will expand at 27% annually through 2030, according to Grand View Research. That gives Zscaler a good shot at annual sales growth exceeding 20% through the end of the decade, especially when the company values its serviceable market at $96 billion.
However, Wall Street expects Zscaler's adjusted earnings to grow at 9% annually through fiscal 2026, which ends in July 2026. That makes the current valuation of 93 times earnings look very expensive. Admittedly, the company beat the consensus estimate by an average of 23% in the last six quarters, but the stock would be pricey even if that trend continues.
MercadoLibre: 15% upside implied by the median target price
MercadoLibre runs the largest online marketplace in Latin America. It accounted for 28.5% of regional retail e-commerce sales last year, more than its next 15 competitors combined, and eMarketer expects that figure to hit 30% by 2026. One reason the company has been so successful is its ability to support sellers with add-on services like payment processing, credit, advertising, and logistics.
MercadoLibre operates the fastest and most expansive delivery network in Latin America. While building that infrastructure is costly, it is also increasing e-commerce penetration across Latin America, while keeping the company ahead of competitors, per eMarketer. MercadoLibre is also the largest retail advertiser in the region, and it has a thriving fintech business.
MercadoLibre reported strong financial results in the first quarter. Revenue increased 37% to $5.9 billion on particularly strong sales growth in the fintech segment, which itself was due to strong adoption of credit and asset management products. Meanwhile, GAAP net income increased 44% to $9.74 per diluted share.
Wall Street expects MercadoLibre's earnings to increase at 36% annually through 2026. That makes the current valuation of 61 times earnings look reasonable. In my opinion, Wall Street has these three stock pegged correctly: At current prices, MercadoLibre is the most compelling buy, Palantir is the most likely to decline, and Zscaler is somewhere in the middle.
