Is Palantir Stock a Buy in 2025 After Its 340% Gain in 2024? Wall Street Analysts Have a Surprising Answer

Source The Motley Fool

Shareholders of Palantir Technologies (NASDAQ: PLTR) just had a fantastic year. The stock gained 340% in 2024, making it the best-performing component of the S&P 500 (SNPINDEX: ^GSPC). That may seem like a bullish signal, but the Wall Street analysts covering the data analytics company are surprisingly (and overwhelmingly) bearish on it.

In fact, only six stocks in the S&P 500 have a higher percentage of sell ratings than Palantir, and the median price target of $39 per share implies a 45% downside from its current price of $71. Note that median refers to the middle value, not the average value. So half of the analysts following Palantir expect the stock to fall by more than 45% in the next 12 months.

Where to invest $1,000 right now? Our analyst team just revealed what they believe are the 10 best stocks to buy right now. See the 10 stocks »

What makes that especially surprising is that Palantir has already fallen by 16% from its record high in recent weeks. Here's what investors should know.

Palantir is a good business with compelling growth prospects in artificial intelligence

Palantir is a data analytics software company. Its core products, Foundry and Gotham, help businesses integrate complex information, build machine learning models, and query data. Its artificial intelligence platform, AIP, adds support for large language models to Foundry and Gotham, letting clients apply generative AI to their operations.

The company has received glowing praise from certain industry analysts. For instance, Forrester Research last year recognized it as a leader in AI/machine learning platforms, awarding AIP a higher score for current capabilities than any other product on the market, including Alphabet's Vertex AI. "Palantir is quietly becoming one of the largest players in this market," its analysts wrote.

Similarly, Dresner Advisory Services listed Palantir as one of two top-ranked vendors in its 2024 market study on artificial intelligence, data science, and machine learning software. In that context, the business has compelling growth prospects. The International Data Corporation estimates that AI platform sales will increase at an annualized rate of 41% through 2028.

Palantir is executing on that opportunity. The company beat Wall Street's high expectations on the top and bottom lines in the third quarter. Its customer count increased by 39% to 629, and its average existing customer spent 18% more than in the prior-year period. Revenue increased by 30% year over year to $726 million, its fifth consecutive sequential acceleration, and non-GAAP earnings increased 43% to $0.10 per diluted share.

"The release of our newest platform, AIP, has transformed our business," wrote CEO Alex Karp in his latest shareholder letter. "The growth of our business is accelerating, and our financial performance is exceeding expectations as we meet an unwavering demand for the most advanced artificial intelligence technologies from our U.S. government and commercial customers."

Two people sit at a table on which financial documents are visible.

Image source: Getty Images.

Palantir is a very expensive stock despite its compelling growth prospects

While Palantir has compelling growth prospects from a business perspective, that does not necessarily make the stock a good investment. Indeed, Wall Street thinks Palantir's adjusted earnings will increase by just 31% in the next four quarters. Compared to that consensus estimate, its valuation of 200 times adjusted earnings looks very expensive.

For that reason, while Palantir is undoubtedly well positioned to capitalize on growing demand for AI software, investors should avoid the stock until it's trading at a much cheaper valuation. I see very little (if any) upside in the near term from the current share price, and I expect better entry points to present themselves in the future.

Having said that, Dan Ives at Wedbush Securities sees significant upside for Palantir over the long run. In fact, he recently told Yahoo Finance that Palantir could be the next Oracle or Salesforce. For context, those software companies currently have market values of $450 billion and $310 billion, respectively, while Palantir is worth $160 billion. In other words, Ives thinks Palantir may double or even triple in value over time.

Even so, investors should be cautious with the stock now. Its current valuation is unsustainable. Unless Palantir exceeds Wall Street's earnings estimates by wide margins, the stock could experience a material correction in the coming months.

Should you invest $1,000 in Palantir Technologies right now?

Before you buy stock in Palantir Technologies, consider this:

The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Palantir Technologies wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.

Consider when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $818,587!*

Stock Advisor provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month. The Stock Advisor service has more than quadrupled the return of S&P 500 since 2002*.

See the 10 stocks »

*Stock Advisor returns as of January 13, 2025

Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. Trevor Jennewine has positions in Palantir Technologies. The Motley Fool has positions in and recommends Alphabet, Oracle, Palantir Technologies, and Salesforce. The Motley Fool has a disclosure policy.

Disclaimer: For information purposes only. Past performance is not indicative of future results.
placeholder
Nvidia stock sinks 4% as Trump’s tariff plans rattle AI tradeNvidia shares fell over 4% early Monday after US President Donald Trump delivered a stern message about trade tariffs. Trump said on Sunday that no country would be given any special treatment regarding tariffs. He also signed new trade policies into effect on April 2, which he calls “Liberation Day.” This frightened investors, who had […]
Author  NewsBTC
Apr 01, Tue
Nvidia shares fell over 4% early Monday after US President Donald Trump delivered a stern message about trade tariffs. Trump said on Sunday that no country would be given any special treatment regarding tariffs. He also signed new trade policies into effect on April 2, which he calls “Liberation Day.” This frightened investors, who had […]
placeholder
Bitcoin Price Bounces Back—Can It Finally Break Resistance?Bitcoin price started a recovery wave above the $83,500 zone. BTC is now consolidating and might struggle to settle above the $85,500 zone. Bitcoin started a decent recovery wave above the $83,500
Author  NewsBTC
22 hours ago
Bitcoin price started a recovery wave above the $83,500 zone. BTC is now consolidating and might struggle to settle above the $85,500 zone. Bitcoin started a decent recovery wave above the $83,500
placeholder
Bitcoin Price Struggling but Short-Term Holders Might Be Setting the Stage for $150KBitcoin has recently displayed signs of upward momentum, trading at $85,215, marking a 2.2% increase in just the past day. Despite this short-term gain, the asset remains down by over 21.2% from its
Author  NewsBTC
17 hours ago
Bitcoin has recently displayed signs of upward momentum, trading at $85,215, marking a 2.2% increase in just the past day. Despite this short-term gain, the asset remains down by over 21.2% from its
placeholder
U.S. March Nonfarm Payroll Preview: Even If Data Aligns with Expectations, Financial Markets May Not Escape the Fate of VolatilityOn 4 April 2025, the United States will release its March Nonfarm Payrolls (NFP) data. The market consensus currently anticipates job growth of 128,000, a decline from February’s 151,000 (Figure 1). W
Author  TradingKey
17 hours ago
On 4 April 2025, the United States will release its March Nonfarm Payrolls (NFP) data. The market consensus currently anticipates job growth of 128,000, a decline from February’s 151,000 (Figure 1). W
placeholder
Gold price stabilizes ahead of Trump's tariffs announcement on “Liberation Day”Gold price (XAU/USD) stabilizes just above $3,130 at the time of writing on Wednesday following a mean reversal move the prior day after a fresh all-time high got eked out at $3,149 before closing in negative territory.
Author  FXStreet
16 hours ago
Gold price (XAU/USD) stabilizes just above $3,130 at the time of writing on Wednesday following a mean reversal move the prior day after a fresh all-time high got eked out at $3,149 before closing in negative territory.
goTop
quote