Palantir's Mixed Bag Results Leave Investors Skeptical
Palantir Shares Falter Amidst Concerns over Insufficient Impressive Earnings
Despite palantir (PLTR) shares plummeting Tuesday, the tech giant managed to surpass Wall Street's expectations. But, it seems the impressive results weren't enough to sway investors.
Palantir's stock tanked more than 12% to around $108 in recent trading, despite a 40% increase for 2025 and an astounding 400% gain over the past year.
Analysts at Wedbush remain optimistic, declaring that Palantir is capitalizing on the AI craze. They kept their "outperform" rating and bumped their price target to $140 from $120. Bank of America, too, issued a "buy" rating with a $125 target.
However, Jefferies analysts expressed doubts about the company's current valuation, despite strong demand trends. They maintained an "underperform" rating and slapped a $60 price target, potentially implying a 45% drop.
Morgan Stanley, with a "neutral" stance, noted Palantir's superior software performance but struggled to predict future share growth due to the company's high valuation. They bumped their price target up to $98 from $90.
Analysts' Take - A Tale of Two Perspectives
Analysts grapple with Palantir's valuation, torn between its robust growth and lofty stock price. The company's Q1 2025 results demonstrated a substantial 39% revenue growth and raised 2025 guidance by 4%, 10%, and 13% respectively for revenue, operating income, and free cash flow. The military contracts, such as the recent NATO deal, highlight a growing demand for AI. Gross margins remain high at 80.25%, and revenue surged by 28.79% YoY.
Yet, concerns persist over the stock's current multiples, as analysts argue that even after a modest post-earnings dip, the company's market-implied expectations may already account for several years of high growth. Only 1 out of 12 analysts tracked by Visible Alpha rated it a "buy" ahead of earnings, indicating a preference for "hold" or "sell" due to valuation concerns. A slight dip in operating margins from 45% to 44% also raises queries about scalability amid rising costs.
Struggling to Strike a Balance
Investors appear to be wrestling with a conundrum - weighing the near-term execution (strong guidance, AI adoption) against long-term sustainability (whether growth warrants the current multiples). As William Blair noted, while Palantir's growth is impressive, "valuation should not be irrelevant," especially after a 391% annual rally. This tension likely contributes to the mixed sentiment surrounding the stock.
- Despite Palantir's strong Q1 2025 results and raised guidance, some analysts remain skeptical, expressing concerns over the company's lofty stock price and its ability to sustain growth.
- Analysts from Jefferies, for instance, maintained an "underperform" rating and set a price target of $60 for Palantir, indicating a potential 45% drop, due to doubts about the company's current valuation.
- On the contrary, Wedbush and Bank of America remain optimistic, declaring that Palantir is capitalizing on the AI craze and issued "outperform" and "buy" ratings respectively, with price targets of $140 and $125.
- Morgan Stanley, with a "neutral" stance, struggled to predict future share growth due to Palantir's high valuation, but recognized its superior software performance, bumping their price target up to $98 from $90.
- As the finance world awaits Palantir's future trading, the tech giant's shares will likely continue to face the tug-of-war between investors bullish on AI growth and those concerned about the company's current valuation.
