Wall Street Analysts Think Palantir Technologies Stock Will Decline by 40% This Year. Are They Right?

Stock Performance and Analyst Sentiment - Palantir's stock has surged 362% since the beginning of 2024, making it one of the hottest AI stocks [1] - Wall Street analysts consider the stock significantly overvalued, with an average price target of $46 01, representing a 40% downside from the current price of around $75 [1][2] Revenue and Profitability - Palantir's Q3 revenue grew 30% year-over-year, with $408 million from government clients and $317 million from commercial customers [3][4] - The company achieved a 20% profit margin in Q3, demonstrating strong profitability [4] Valuation Metrics - Palantir trades at 397 times trailing earnings and 138 times forward earnings, indicating a high valuation [5] - The price-to-sales (P/S) ratio of 72 is significantly higher than other software companies, even those that are not profitable [6][7] Growth Expectations and Realities - Analysts project 25% revenue growth for 2025, lower than the 30% growth assumed in optimistic scenarios [9] - Even with a best-case scenario of $9 82 billion in revenue and $2 95 billion in profits after five years, the stock remains overvalued with a trailing P/E ratio of 61 [8][9] Shareholder Dilution and Future Prospects - Palantir faces shareholder dilution, with its share count increasing 3% year-over-year [9] - While a 30% profit margin is achievable, it alone cannot justify the current stock price [10][11]