Palantir Stock Faces Significant Risks

RBC Capital Markets has raised concerns about Palantir’s stock, suggesting it could see a significant drop due to valuation issues and weakening fundamentals. The bank has kept its underperform rating and set a price target of $50 as the company approaches its earnings report this Monday. This projection indicates that the stock could decline by as much as 70%. Over the past year, Palantir, which has garnered interest from retail investors, has seen its stock price surge by an impressive 121%. However, analyst Rishi Jallia noted a 9% decrease in the stock over the last three months.

Despite its recent gains, Jallia emphasized that the current risk-reward scenario appears unfavorable for Palantir. He stated, “We cannot justify why Palantir is the most expensive company in our software coverage. Without a substantial beat-and-raise quarter to enhance its growth trajectory, the valuation seems hard to defend.” Additionally, Jallia pointed out that RBC’s government tracking estimates indicate declines in Palantir’s eligible contract value, suggesting fewer late-stage deals and slower revenue growth than anticipated.

There’s also a growing skepticism surrounding the commercial viability of Palantir’s enterprise customers, which may lead some to reconsider their involvement with the company. Jallia remarked they’re looking for signs of improvement in the commercial sector—such as better net revenue retention or meaningful monetization from its AI products—though he remains cautious given the intense competition.

Retail investors are expressing increasing dissatisfaction, especially regarding Palantir’s long-term objectives and revenue growth strategies. With the company holding a cash reserve of about $6 billion, there’s a feeling among retail investors that they are not seeing enough action in terms of capital returns. Jallia mentioned concerns related to privacy and ethics, noting that a lack of a clear strategy in that area could further impact the company’s valuation.