Palantir stock falls as Mizuho cuts rating to sell; sees over 20% downside risk

Mizuho analysts cut their rating on Palantir (NYSE:PLTR) stock from Neutral to Underperform, saying the big data analytics software maker’s rich valuation is becoming “hard to justify.”

Alongside a downgrade call, Mizuho also adjusted its price target on PLTR stock from $21 to $22. Still, the new price target implies a downside risk of about 23% compared to Monday's closing price.

Analysts said Palantir has demonstrated a generally strong performance in recent quarters, however, they remain concerned about the “lack of visibility” into the company’s business.

Mizuho notes that some of the recent positive results have been of lower quality and express limited confidence in Palantir’s ability to consistently deliver strong results.

“But primarily, following the material 67% rise in the shares YTD, we find it increasingly difficult to justify PLTR's high multiple that in our view likely already discounts significant acceleration versus our/consensus expectations for 20-21% revenue growth,” analysts wrote.

Analysts point out that PLTR shares now trade at a 2024 and 2025 enterprise value-to-sales (EV/sales) multiple of 25-26x and 21x, respectively. This represents a substantial 160% premium to the enterprise software peer group median for next year, they highlighted.

Moreover, PLTR's current near-term EV/Sales multiple “is at peak levels as measured over the past 2-3 years.”

Palantir announced on Monday that it will release its Q2 results for the period ending June 30, 2024, on August 5 after the U.S. markets close.

Analysts on Wall Street expect the software maker to report earnings per share (EPS) of 8 cents, compared to the 5 cents reported a year ago. Revenue is projected to come in at $652.1 million, up from $533 million last year.

Related Articles

Palantir stock falls as Mizuho cuts rating to sell; sees over 20% downside risk

Musk plans to give $45 million a month to new pro-Trump PAC, WSJ reports

Ocado soars after lifting FY guidance; technology business leading