Palantir (PLTR) shares closed down another nearly 10% on Tuesday as investors continued to pull back from AI stocks more broadly on concerns of overly stretched valuations.
In its latest report, Citron Research said PLTR will remain “overvalued” even if it crashed to just $40 per share. Adding fuel to its share price decline was Sam Altman’s comment that the AI market is in a bubble right now.
Palantir stock has tanked sharply from its all-time high of about $190 in recent sessions. At writing, it’s down well over 20% versus that high.
Despite recent weakness, PLTR shares’ forward price-earnings (P/E) multiple remains north of 400x – an unsettling valuation even for the highest-risk investors.
And while Palantir sure is growing at an exciting pace, with revenue coming in up 48% on a YoY basis in its latest reported quarter, that P/E ratio, nonetheless, suggests investors expect the growth rate to sustain forever.
In reality, however, the Denver-headquartered firm may be hard-pressed to record a similar growth rate come next year, if for no other reason than the law of large numbers.
Investors should also note that Goldman Sachs analysts raised their price target on Palantir shares by more than 50% this week, and yet, they landed on $141 only.
The investment firm’s upwardly revised price objective still indicates potential for another 4% downside in PLTR stock from here, reinforcing just how overvalued it really is at current levels.
Additionally, Palantir’s high relative strength rating and beta of more than 2.5x further substantiates that it’s super vulnerable to sharp corrections when sentiment turns.
Therefore, it would be a smart decision to pick other, more reasonably valued AI stocks over PLTR.
Wall Street analysts widely agree with the cautious stance on Palantir due to valuation concerns.
The consensus rating on PLTR shares currently sits at “Hold” only with the mean target of about $156 now finally above its current trading price again.
