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Palantir (PLTR) stock tanked as much as 14% on Thursday, Feb. 20 following news that President Donald Trump’s administration wants the Pentagon to lower its budget in each of the next five years.
While the likes of Wedbush analyst Dan Ives believe the announcement is a positive for PLTR since it could redirect defense budget to the AI-enabled solutions that Palantir specializes in, most Wall Street analysts warn of significant further declines in the company’s share price ahead.
Palantir stock has soared more than 300% in the trailing 12 months.
Why Are Analysts Bearish on Palantir Stock?
Earlier in February, Palantir reported estimate-beating financial results for its fourth quarter. Its guidance for at least $3.74 billion in sales for 2025 also topped Street estimates of $3.52 billion.
Still, valuation remains a big risk for PLTR shares, which is why Wall Street currently rates them at “Hold” only. The mean target of $82 indicates potential downside of about 20% from here.
At its peak on Feb. 19, Palantir stock touched a price-earnings ratio of more than 1,000x (trailing 12 months basis) compared to less than 35x on average for U.S. software stocks.
Valuation concerns have made influential investor Cathie Wood reduce her exposure to PLTR shares as well. Last week, the founder and chief executive of Ark Investment Management unloaded over $47 million worth of Palantir stock.
Loop Capital Initiates PLTR With a ‘Buy’ Rating
Not everyone is overly concerned about Palantir’s valuation, though. In fact, Loop Capital assumed coverage of PLTR shares with a “Buy” rating this week. Its analyst Mark Schappel sees the company’s stock price rallying to $141 over the next 12 months. His target indicates potential upside of more than 40% from current levels.
In his research note, Schappel argued that Palantir stock was trading at a massive premium but said it had “all the hallmarks (massive market, category leader, strong execution) of becoming a game-changing software stock.”
The analyst is fully convinced that PLTR is set to lead the exceptional opportunity in the rapidly growing artificial intelligence-driven software market. That said, Palantir stock remains unattractive for income investors as it does not currently pay a dividend.
