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Palantir (PLTR) shares have rallied rather significantly in the build up to the company’s quarterly earnings release on May 5.
According to Barchart, the big data analytics firm is expected to earn $0.08 per share in its first financial quarter, which would mean 100% growth on a year-over-year basis.
But does PLTR have what it takes to sustain that growth rate over the long term? That’s a more serious question that UBS analysts posed in their research note on Tuesday.
UBS Takes a Dovish Stance on Palantir Stock
UBS analyst Karl Keirstead acknowledged the strong fundamentals that have helped PLTR shares deliver a more than 15x increase since late 2022 in his recent report.
However, a potential decline in government spending under President Donald Trump could prove to be a meaningful headwind for Palantir stock moving forward, he added.
On Tuesday, Keirstead reiterated his “Neutral” rating on the big data analytics firm. He left his price target unchanged at $105 as well, which indicates about 9% potential downside from here.
Note that PLTR is currently up more than 80% versus its year-to-date low.
PLTR Shares are Overvalued at Current Levels
Keirstead’s concerns are valid, given the Denver-headquartered firm generates more than half of its revenue from government contracts.
Being a software platform, PLTR is relatively less exposed to potential impact of Trump’s new tariffs this year.
However, valuation remains a major concern in owning Palantir stock at current levels – something that several Wall Street analysts have cited in their recent notes to clients.
Palantir is currently going for more than 300 times its estimated earnings for 2025. That’s sharply higher than other AI stocks, including Nvidia (NVDA), which currently has a forward price-earnings multiple of about 28x only.
And while PLTR is expected to grow more than Nvidia in Q1, the growth rate is still not fast enough to warrant that sort of a forward multiple.
Wall Street Sees Significant Downside in Palantir
Investors should also note that other Wall Street analysts are even more dovish on Palantir stock.
The consensus rating on PLTR shares currently sits at “Hold” only with the mean target of $84 indicating potential downside of close to 30% from current levels.
