Palantir Technologies saw its stock tumble after an analyst downgraded the company’s outlook for the near term. Keith Weiss from Morgan Stanley lowered his call on Palantir (PLTR) to Underweight from Equal Weight. However, he did raise his target for the stock price to $9 from $8.
In a research note, Weiss expressed his concerns about the visibility and monetization of Palantir’s artificial intelligence platform (AIP). He mentioned that near-term optimism in the AI product cycle and the valuation premium create an unfavorable risk-reward ratio for investors.
Despite the stock being down 8% to $15.03 on Thursday, it has still experienced a significant surge of 134% in 2023. The rise in Palantir’s stock price is part of a larger trend in the tech industry, where companies like Nvidia (NVDA) and Meta Platforms (META) have also seen significant growth due to excitement surrounding artificial intelligence.
One of the key issues for Palantir is the lack of clarity on how they intend to monetize their AI technology. During an earnings call on Aug. 7, CEO Alexander Caedmon Karp stated that they are currently focused on educating the market and onboarding users before implementing monetization strategies.
Palantir Technologies has not provided further comment on the recent downgrade.
Palantir Faces Challenges in AI Market
The excitement surrounding artificial intelligence (AI) has had a positive impact on Palantir’s valuation, but its full potential might take some time to be realized, according to analyst Weiss. The company remains in the early stages of determining a monetization strategy for its solution.
However, despite the promising outlook, Palantir’s stock has taken a hit recently. With a price-to-earnings ratio of 64.8, investors may be concerned about the company’s ability to deliver on expectations. In fact, the stock has dropped by 24% this month.
While Palantir did observe a 38% increase in the number of customers in the second quarter compared to last year, the revenue growth rate was only 13%. This has left Wall Street unimpressed, as management’s sales growth guidance did not meet expectations.
Analyst Gil Luria from D.A. Davidson commented on the situation, stating that despite the optimism surrounding increased demand for AI-related workloads, the company’s projections for FY23 revenue growth were only raised by $2 million. Luria suggests that significant efforts are required to translate the strong AI demand into accelerated growth.
Luria maintains a Neutral rating on the stock and sets a target price of $15.
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