Palantir Faces 75% Downside Risk, Warns RBC Capital
Analysts initiate coverage with a bearish $45 price target, citing an 'unfavorable risk-reward' profile due to the AI firm's high valuation.
Shares of data analytics firm Palantir Technologies (PLTR) are facing significant headwinds, as analysts at RBC Capital have initiated coverage with a stark warning for investors. The bank has set an 'underperform' rating on the stock, accompanied by a price target of $45, which suggests a potential downside of approximately 75% from its current trading levels.
The bearish outlook is rooted in the company's steep valuation. According to the RBC Capital report, Palantir presents an for investors at its present price. The AI software maker's stock has been a popular but volatile name in the tech sector, trading at valuation multiples that are significantly above market averages. This high valuation has been a point of contention among Wall Street analysts, with some expressing caution despite the company's growth prospects.
Palantir currently trades at over 100 times forward sales estimates and more than 275 times forward earnings estimates. These metrics suggest that the market has priced in exceptionally high growth for several years to come. The concern, as highlighted by RBC Capital, is that any failure to meet these lofty expectations or a broader market shift could trigger a substantial correction in the share price. The initiation of coverage from a major financial institution with such a cautious stance could weigh on investor sentiment.
This analysis adds to a growing debate over the valuations of popular artificial intelligence stocks, which have seen massive rallies. While bulls point to Palantir's strong position in government and commercial contracts, bears argue that the current stock price does not adequately reflect the risks. According to , the consensus remains divided, and investors will be closely watching the company's upcoming earnings reports for any signs of weakness that could justify RBC's .