After experiencing a significant increase in 2024, driven by its focus on the thriving artificial intelligence (AI) sector, Palantir’s (NASDAQ:PLTR) share price has encountered a difficult start to 2025 due to concerns of an accelerated decline.
The gains reached their peak when Palantir’s stock hit a record high of nearly $85. However, the recent price movement has been disappointing, with PLTR share price going through a prolonged losing streak.
Nevertheless, Palantir has shown resilience, with the stock rising over 4% to trade at $65.17 at press time, despite sustaining losses of 4.4% over the past five days.
One lingering concern about Palantir’s rise in 2024 was its valuation. Some market participants suggested that speculation and expectations of future growth drove the momentum.
As a result, the stock was at risk of collapsing if the software company failed to meet its growth targets. With bullish sentiment currently subdued, there are questions about a potential decline that could test the crucial $50 support level.
In analyzing this possibility, one area to consider is insights from Wall Street analysts who have issued a mixed outlook on the technology company. While some argue that the ongoing demand in the AI sector is favorable for the company’s future, others foresee further corrections due to valuation concerns.
For example, according to a report by Finbold, Jefferies analyst Brent Thill expects Palantir to drop significantly, setting a price target of $28 and reiterating his “Underperform” rating. Thill raised concerns about the firm’s valuation, volatility, and insider selling. He also warned of potential “multiple compression” as market sentiment shifts amid growing competition in AI and data analytics.
Similarly, Morgan Stanley downgraded Palantir to “Underweight” in early January, citing overvaluation following a 340% surge in the stock in 2024. The firm set a $60 price target, noting limited upside despite strong performance in Palantir’s government and commercial segments. Analyst Sanjit Singh acknowledged the company’s success with its AI platform, cost control, and deal momentum but questioned its future growth potential.
Deutsche Bank also expressed bearish sentiment, predicting that Palantir will trade below the $50 mark despite its recent record highs. In a January 8 investor note, the bank increased Palantir’s price target from $26 to $35 but maintained a “Sell” rating. While acknowledging Palantir’s potential in AI software, the firm was cautious about scaling efficiency debates.
Interestingly, a consensus among 17 Wall Street analysts projects Palantir to trade below $50 in the next 12 months. According to estimates shared on TipRanks, the software company is expected to trade at $46.57, a drop of over 30% from its current valuation.
However, it is worth noting that Wall Street is not unanimously bearish on Palantir. For instance, Wedbush Securities analyst Dan Ives, who referred to the stock as the “Messi of AI,” set a price target of $75. He predicts that Palantir will lead the AI software space, especially under the policies of the second Donald Trump administration.
From a technical perspective, some market participants believe that Palantir’s current correction is a healthy pullback after a significant increase. For example, pseudonymous analyst The Long Investor mentioned in a January 13 post that the current price action is normal and follows established chart patterns.
The expert pointed out that Palantir is revisiting key Fibonacci levels that are crucial for a healthy uptrend. The 0.382 Fibonacci retracement at $64.68 and the 0.618 retracement at $49.60 are potential support areas where buyers may enter the market.
Furthermore, the stock remains comfortably above its 200-day moving average, which is around $36.00, supporting a long-term bullish case.
Looking ahead, Palantir is scheduled to release its Q4 2024 earnings on February 3, 2025, which could be a pivotal moment for the stock’s trajectory.
While the company has shown strong revenue growth, particularly in its U.S. commercial business, its high valuation, trading at multiples far beyond industry peers, has raised doubts.
To avoid further decline, Palantir needs to demonstrate growth, profitability, and operational efficiency to convince investors of its long-term value.
