Palantir stock is hot right now, but it would be a bad idea to chase it now, a Baird analyst said.
Palantir Technologies has been soaring this year as the company emerged as a major player in artificial intelligence and in the defense market. But Baird analyst William Power counseled caution on the stock at this time. He initiated coverage at neutral with a $70 price target.
"We are positive on the company's position, but are wary of chasing given strong year-to-date performance and valuation," Power said in a Wednesday client note.
Palantir "has excelled at actually putting generative AI applications into production, which is where we expect most value to be extracted in the coming years."
But Power pointed to risks with the stock. One is the fact that Palantir has outpaced the S&P 500 big time, "suggesting high expectations, though we also acknowledge the strong, accelerating operating momentum."
The change in Washington also means uncertainty, although it could also benefit Palantir.
"New administration risk?" Power wrote. "Any pause in contract awards could be a near-term risk, though ultimately we believe Palantir can provide a force multiplier for government efficiency."
The cautious view comes at a time when Palantir remains a Wall Street favorite.
PLTR stock has gained more than 325% year to date, making it the top performer in the S&P 500 this year.
Palantir stock hit a record 80.91 Monday morning but reversed lower. That was a time when investors could have chosen to take some profits in the highflier.
The AI stock fell to 68.09 intraday Wednesday before rebounding for a modest gain.
Shares edged up 0.9% to 73.13 on Thursday afternoon.
Palantir stock remains well above its 50-day and 21-day moving averages, even with the mini-pause this week.
Palantir also has a perfect Relative Strength Rating of 99, according to IBD MarketSurge.
