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Palantir (NASDAQ:PLTR) risks a valuation reset toward $40 per share unless it delivers a blowout quarter, RBC's Rishi Jaluria warns ahead of today's Q1 report.
Shares have already surged 64% year-to-date as investors bet on CEO Alex Karp's AI momentum, but Wall Street expects revenue of $863.8 millionup 40% year-over-yearand an operating margin of 41.8%, which would mark an 8.5-point annual improvement but a 3.2-point sequential dip.
RBC argues these forecasts leave the bar high: We cannot rationalize why Palantir is the most expensive name in software, Jaluria writes, cautioning that anything less than a meaningful beat-and-raise could expose the stock's stretched multiples.
Commercial wins in the past quarterpraised for record client adds and robust marginswere partly driven by one-off deals, according to RBC's government contract tracker, which sees flat growth in Palantir's cornerstone public-sector arm.
Meanwhile, market incumbents like Microsoft (NASDAQ:MSFT) are aggressively encroaching on AI use cases, and Jaluria questions whether Palantir's bespoke deployment model can scale beyond large, complex enterprises. He pegs downside at roughly $40 per share under his baseline scenario and sees limited upside without a substantial acceleration in recurring bookings.
Investors should care because Palantir's lofty valuationtrading north of 78 times forward salesleaves little room for error, and a miss could trigger a swift re-rating alongside peers.
Investors will be watching today's earnings call for guidance on deal pipelines, customer churn, and any bump to Karp's growth outlook before reassessing whether PLTR can justify its premium multiple.
This article first appeared on GuruFocus.