Morgan Stanley renewed coverage of Palantir Technologies on Monday with an underweight rating citing valuation after a big run-up in 2024. Palantir stock, one of 2024's artificial intelligence plays, tumbled on the news.
"While acknowledging strong execution and momentum, we see success more than priced in at the current multiple premium," said analyst Sanjit Singh.
In November, a different Morgan Stanley analyst withdrew an underweight rating after shares popped on the software maker's third quarter earnings report.
"2025 revenue estimates are only 10% higher compared to the beginning of 2024," Singh added. "More surprising, even underneath the narrow estimate revisions, the commercial business – where most of the AI narrative is supposed to play out — has contributed less to the 2025 revenue estimate revisions than the government business."
On the stock market today, Palantir stock tumbled 5.2% to close at 75.66.
Palantir stock advanced 340% in 2024 amid buzz over artificial intelligence, with much of the gain coming after Donald Trump's presidential election win. Trump will take office on Jan. 20.
Jefferies analyst Brent Thill maintains a bearish view.
"While we do believe the company has an AI technology advantage in the long-term, we are concerned that the stock has rallied to unsustainable valuation levels primarily on the back of AI euphoria and retail trading momentum," Thill said in a report published on Sunday. "We believe fundamentals are alive and the company has potential to gain share in an underpenetrated and large TAM (market) should the recent AI momentum continue. However, PLTR stands alone as the most expensive publicly traded software company and history tells us that these multiples are unsustainable."
Palantir Stock: Technical Ratings
Meanwhile, PLTR stock hit an all time intraday high of 84.80 on Dec. 24. Shares pulled back in late December.
Further, Palantir has provided data analytics tools to government customers for intelligence gathering, counterterrorism and military purposes. Also, Palantir now aims to use generative artificial intelligence to spur growth in the U.S. commercial market.
Also, Palantir stock holds a Composite Rating of 99 out of a best-possible 99, according to IBD Stock Checkup. IBD's Composite Rating combines five separate proprietary ratings into one easy-to-use rating. The best growth stocks have a Composite Rating of 90 or better.
PLTR stock holds an Accumulation/Distribution Rating of A. That rating analyzes price and volume changes in a stock over the past 13 weeks of trading. A+ signifies heavy institutional buying; E means heavy selling. Think of a C grade as neutral.
As of Jan. 6, Palantir stock is very extended above an entry point of 29.83, according to MarketSurge. Also, PLTR stock trades well above a 5% buy zone.
Follow Reinhardt Krause on Twitter @reinhardtk_tech for updates on artificial intelligence, cybersecurity and cloud computing.
