Palantir Technologies is definitely a hot topic on Wall Street right now. Everyone is eager to see how the forthcoming third-quarter earnings will compare to last quarter’s impressive performance.
It’s not just about the numbers, though. Analysts from RBC Capital Markets are noting a lot of talk about a potential stock split, with some calling it “the most relevant topic” for retail investors lately.
Interestingly, Palantir hasn’t ever done a stock split since becoming a public company. Even though a move like that wouldn’t shift the company’s ultra-high valuation significantly, it could make shares more available to a wider range of investors after a remarkable increase over the past year.
If Palantir goes ahead with a stock split, it would join the ranks of other major players in the AI space, like Nvidia, which had a massive 10-for-1 stock split in June 2024.
Other issues are also being brought to light. A recent poll highlighted that many retail investors are worried about privacy and ethical concerns, as well as expressing frustration over the lack of capital returns, especially given Palantir’s impressive cash reserve of $6 billion.
Analysts have expressed skepticism; they cannot justify Palantir’s hefty price tag compared to other software companies. They argue that, unless we see a big earnings beat paired with a promising guidance update, the valuation doesn’t hold up well—and could indeed seem unsustainable.
Currently, RBC Capital Markets views Palantir as an ‘Underperform’ investment, setting a modest price target of $45, which is among the lowest on Wall Street. On Tuesday, shares rose 0.6%, reaching $190.56, marking a remarkable 152% increase this year and a striking 324% total increase over the past year.
Palantir’s lofty market valuation is hard to ignore. As of the last close, the firm had a price-to-earnings ratio of 234.23, while the S&P 500 index stood at about 23.24.
Separately, analysts from Citi Research, led by Tyler Radke, rated Palantir as ‘Neutral’ on another report Tuesday. They noted its extreme valuation may pose risks for future trends. Citi slightly upped its price target to $190 from $177.
The research team acknowledged that last quarter Palantir exceeded expectations with an unusually large earnings beat and guidance increase. They anticipate some revenue upside moving forward but predict a more modest overall guidance raise of about three points.
That said, it could signal growth but less of a big shift month-to-month, aligning more with historical norms, especially compared to last quarter’s exceptional leap of around 7 points.
Contact Mackenzie Tatananni at mackenzie.tatananni@barrons.com
