Why Wall Street could be wrong on Palantir stock price crash

Core Viewpoint - Palantir (NASDAQ: PLTR) stock is a notable performer in the AI rally, but concerns about its long-term sustainability persist among some Wall Street analysts [1][2]. Valuation Concerns - Analysts express worries about Palantir's overvaluation, with a price-to-earnings (PE) ratio of 755.67 as of March 24, indicating potential for a significant stock price drop if growth expectations are not met [2]. - Jefferies' Brent Thill predicts a potential decline to $60, citing sluggish hiring, stalled international growth, insider selling, and leadership uncertainty as contributing factors [3]. - RBC's Rishi Jaluria also warns of downside risks, maintaining an 'Underperform' rating with a target price of$40, influenced by the resignation of the Chief Accounting Officer and CEO Alex Karp's plan to sell shares [4]. Analyst Ratings and Forecasts - A consensus among 18 Wall Street analysts at TipRanks shows a 'Hold' rating for Palantir, forecasting an almost 5% downside over the next 12 months with an average price target of $92 [4]. Growth Potential - Despite concerns, Palantir's Q4 2024 earnings showed a 36% year-over-year revenue increase, driven by a 43% rise in its customer base, suggesting potential for future growth [7]. - The company is expected to achieve a 31% revenue increase this year, surpassing Wall Street expectations, as it continues to expand its client base, including new clients like Qualcomm and Epirus [8]. Strategic Shifts - Palantir is diversifying its revenue sources by reducing reliance on government contracts, with government clients accounting for 42% of revenue in 2024, while focusing more on the private sector [9]. - The company's Artificial Intelligence Platform (AIP) is gaining traction, automating tasks and attracting new clients, which could bolster growth [9]. Partnerships and Collaborations - A significant partnership with Databricks aims to enhance AI and data analytics capabilities, providing an open, scalable data architecture that could expand Palantir's market presence [10]. - These strategic moves may help mitigate the impact of projected Department of Defense budget cuts, which are a key concern for the company [10].