Wall Street thinks Palantir shares are wildly overvalued

Shares of defense- and intelligence-software company Palantir are up for the third straight session Thursday, making up some of the ground they lost during their 20% tumble to start this year on the heels of an outstanding 2024.

Palantir’s roughly 340% gain last year, supercharged by wild enthusiasm from a rabid base of retail shareholders, made it the biggest gainer in the S&P 500.

Wall Street’s professional Palantir watchers, however, are much more skeptical. The consensus target price for Palantir shares is $46.38, about 35% below where the stock is currently trading (~$70.25).

It’s not like analysts think Palantir’s business is in trouble. In fact, they’ve been more or less steadily ramping up estimates for sales and profit throughout the year, citing better-than-expected performance of Palantir’s AI offerings with commercial clients as well as the ongoing growth of its business with the US government.

Analysts now anticipate that when Palantir reports on Feb. 3, the firm will show some $778 million in revenues for the fourth quarter, up 28% from the prior year.

But the bottom line isn’t as thrilling. Net income, on a GAAP basis, is expected to rise roughly 11% to $103.5 million.

Whether such numbers matter at all for the trajectory of the stock over the short term is a completely different question. The enthusiasm surrounding Palantir over the last year was always more of a vibes-based, retail-trading phenomenon than the rational outcome of rigorous analytic efforts.

But as the steep drop that Palantir suffered early this year shows, when the momentum around highly valued stocks stalls, things can get hairy fast.