Palantir Stock Dips After Analyst Hands Out Sell Recommendation Citing Pricier Valuation: Retail Concurs With Assessment

Palantir Technologies, Inc. ($PLTR) stock pulled back in Monday’s premarket trading after Morgan Stanley assumed coverage with a bearish recommendation.

Morgan Stanley analyst Sanjit Singh assumed coverage of Palantir with an ‘Underweight’ rating and a price target of $60, MarketWatch reported. The price target suggests a potential downside of about 25%.

Palantir was the best-performing S&P 500 stock in 2024, adding about 340% compared to the S&P 500’s 23.30% gain for the year. The stock hit an all-time intraday peak of $84.80 on Dec. 24. After declining for five straight session since its record climb, it recovered on Friday, ending up 6.25% at $79.89.

PLTR chart courtesy of TradingView

Morgan Stanley previously rated Palantir ‘Underweight’ until November before removing the rating to reevaluate its thesis on the company. The coverage has now been transitioned to Singh.

The Positives

Singh conceded that the company has a lot of things right, with U.S. commercial business accelerating and government business reaccelerating. The company has also managed to rein in expenses, he said.

The analyst said, “If executive management teams and decision makers want to get their AI initiative into live production environment rapidly, Palantir has emerged as one the select few partners to call.”

The Pushbacks

Singh noted that Palantir’s 340% gain in 2024 came almost entirely from multiple expansion and estimated 2025 revenue accounted for merely 10% gain for the year. 

He added that the stock is currently pricing in a 30% compounded annual growth rate and 41% free cash flow margins. 

Even Morgan Stanley’s $60 price target makes it the most expensive of what it calls the “high-growth software companies,” the analyst said. It is trading at an 80% premium to its peers, he added.

PLTR sentiment and message volume January 6, 2025, premarket as of 5:26 am ET | Source: Stocktwits

On Stocktwits, retail sentiment toward Palantir stock is ‘bearish’ (39/100), deteriorating from the ‘neutral’ mood that prevailed a day ago, with the sour mood accompanied by ‘low’ message volume.

A Palantir watcher on Stocktwits warned against buying Palantir near its all-time high and when the market is also at an all-time high. Another expressed uneasiness over valuation and said they wanted to wait this out. 

In premarket trading, Palantir stock fell 1.54% to $78.66, as of 5:07 a.m. ET.

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