‘History Doesn't Favor the Bulls,' Says Top Investor About Palantir Stock

Business Insider

12 hours ago

Palantir (NASDAQ:PLTR) stock has been on a tear – no secret there – with shares up nearly 450% over the past year. But the surge reflects more than just AI hype: revenues are rising quickly, new clients keep joining, and management has consistently raised its outlook.
Elevate Your Investing Strategy:
Take advantage of TipRanks Premium at 50% off! Unlock powerful investing tools, advanced data, and expert analyst insights to help you invest with confidence.
In fact, the company recently crossed the $1 billion quarterly revenue milestone for the first time. While Palantir built its reputation on U.S. government security contracts, its latest results show momentum is spreading beyond that niche. U.S. commercial revenue jumped 93% year-over-year – clear evidence that businesses across the economy are finding enormous value in Palantir's expanding suite of AI tools.
And Palantir doesn't seem to be taking its foot off the gas pedal. The company raised its Q3 revenue guidance to $1.087 billion, which would represent 50% year-over-year revenue growth.
The biggest – and perhaps, only – knock against the company is its sky-high valuation. Seizing on this concern, top investor Julian Lin offers a word of caution.
'Despite stellar performance, I believe PLTR stock's valuation is in bubble territory, far exceeding historical tech bubbles,' explains the 5-star investor, who is among the top 1% of TipRanks' stock pros.
There's one particular historical example that Lin mentions, which could cause PLTR bulls to start sweating. That would be Cisco, which was trading at 30x sales before it came crashing down during the 2000 stock bubble. PLTR was recently trading as high as 100x sales, reminds the investor.
'History has proven time and time again that valuations always end up mattering,' emphasizes Lin.
As great as the company has been performing, Lin points out that PLTR's share price is already pricing in years of future growth. While this has arguably been the case for much of the past year, eventually the investor believes the bubble will pop.
This will especially be the case when some negative catalysts enter the picture, which could come in the form of higher inflation or AI-related job losses. This could cause a massive re-rating for PLTR, which Lin suggests could reach a downside of some 80%.
For that reason, the investor is getting out of dodge and is urging bulls to reconsider their commitment to PLTR.
'I just know that history does not shine well when valuations reach irrational exuberance. I reiterate my Strong Sell rating for the stock,' concludes Lin. (To watch Julian Lin's track record, click here)
How does Wall Street see Palantir? The consensus view is less dramatic but hardly bullish. With 13 Hold ratings, 5 Buys, and 2 Sells, PLTR currently carries a consensus Hold (i.e., Neutral) rating. The Street's average 12-month price target of $154.56 implies ~11% downside from current levels. (See PLTR stock forecast)
To find good ideas for stocks trading at attractive valuations, visit TipRanks' Best Stocks to Buy, a tool that unites all of TipRanks' equity insights.