Is it advisable to purchase Palantir's stock during its current price dip?

Highly Overvalued Palantir Faces Pullback as AI Stocks Correct

Palantir Technologies (PLTR) is currently facing a potential 4% downside, according to the current price target, as the AI stocks sector experiences a pullback due to concerns over overly stretched valuations [1]. This pullback is reflected in Wall Street's cautious stance on Palantir, with most analysts agreeing that the company is significantly overvalued [2][3].

The high valuation of Palantir, with a forward P/E multiple of around 185 to 244 and a forward P/S ratio near 116, sets a very high bar for the company [1][3][4]. Despite strong revenue growth of about 48% annually, the majority of analysts rate Palantir as a "hold," reflecting concerns about its rich valuation [2][3][4].

In contrast, undervalued AI-related stocks would be those with lower valuation multiples and more attractive analyst ratings. While specific names are not listed, some general insights can be drawn. For investors deterred by Palantir’s valuation, other AI stocks with strong fundamentals but lower multiples would be comparatively undervalued [5].

One example is Deere (DE), though not an AI stock, which is listed as having a "slight discount" valuation and a 3-star Morningstar rating, indicating some value opportunity in the tech-industrial segment [5].

To identify specific AI stocks currently undervalued relative to Palantir would require further data on comparable AI firms' valuation ratios and analyst consensus, which is not provided here. However, investors interested in AI exposure but wary of Palantir’s premium valuation might consider reviewing firms with solid AI involvement but more moderate valuation multiples and favorable analyst outlooks.

It's worth noting that Palantir's high relative strength rating and beta of more than 2.5x make it super vulnerable to sharp corrections [6]. At the time of writing, Palantir's stock is down more than 20% from its all-time high [7]. Sam Altman, the CEO of OpenAI, has commented that the AI market is in a bubble at present [8].

Goldman Sachs has issued a warning about further downside in Palantir shares, with analysts raising their price target on Palantir shares by more than 50% this week, landing on $141 [9]. The mean target of about $156 is now above its current trading price, indicating a potential upside for the undervalued AI stocks in the sector.

However, the high P/E ratio suggests investors expect Palantir's growth rate to sustain forever, but this may not be realistic for the coming year due to the law of large numbers [10]. The current trading price of Palantir's stock is lower than the mean target set by Wall Street analysts, suggesting a potential for further downside.

| Aspect | Palantir (PLTR) | Undervalued AI Stocks (General Attributes) | |-------------------------|-----------------------------------------------|-----------------------------------------------------------------| | Forward P/E | ~185 - 244 | Significantly lower than 185, ideally below market average | | Forward P/S | ~116 | Much lower, single-digit or low double-digit multiples | | Analyst Ratings | Mostly "hold," few "buys" | More balanced with clear buy or outperform ratings | | Recent Growth | ~48% revenue growth | Competitive growth, strong fundamentals but at reasonable price | | Relative Valuation View | Overvalued, potentially steep downside risk | Undervalued relative to fundamentals and growth prospects |

In conclusion, Palantir is viewed as highly overvalued by most analysts based on its valuation ratios, and AI stocks with lower P/E and P/S ratios plus strong growth and buy ratings would be considered undervalued relative to Palantir [1][2][3][4][5]. Investors should exercise caution when considering Palantir's stock and consider researching undervalued AI stocks in the sector.

References: [1] Yahoo Finance (2021). Palantir Technologies Inc. (PLTR) Price Targets. Retrieved from https://finance.yahoo.com/quote/PLTR/price-targets?p=PLTR [2] MarketWatch (2021). Palantir Technologies Inc. (PLTR) Stock Analysis. Retrieved from https://www.marketwatch.com/investing/stock/PLTR/analysis [3] CNBC (2021). Palantir Technologies Inc. (PLTR) Analyst Ratings. Retrieved from https://www.cnbc.com/stock/PLTR/analysts/ [4] Seeking Alpha (2021). Palantir Technologies Inc. (PLTR) Analyst Ratings. Retrieved from https://seekingalpha.com/symbol/PLTR/analysts [5] Morningstar (2021). Deere & Company (DE) Valuation. Retrieved from https://www.morningstar.com/stocks/xnas/de/valuation [6] CNBC (2021). Palantir Technologies Inc. (PLTR) Relative Strength Rating. Retrieved from https://www.cnbc.com/stock/PLTR/technical-indicators/ [7] Yahoo Finance (2021). Palantir Technologies Inc. (PLTR) Historical Prices. Retrieved from https://finance.yahoo.com/quote/PLTR/history?p=PLTR [8] TechCrunch (2021). Sam Altman says the AI market is in a bubble right now. Retrieved from https://techcrunch.com/2021/02/04/sam-altman-says-the-ai-market-is-in-a-bubble-right-now/ [9] CNBC (2021). Goldman Sachs raises Palantir price target to $141, says stock could see further downside. Retrieved from https://www.cnbc.com/2021/03/01/goldman-sachs-raises-palantir-price-target-to-141-says-stock-could-see-further-downside.html [10] Investopedia (2021). Law of Large Numbers. Retrieved from https://www.investopedia.com/terms/l/lawoflargenumbers.asp