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Shares of Palantir technologies (PLTR, Financial) slipped 1% in Pre-market trading on Monday after Morgan Stanley analyst Sanjit Singh began coverage of the stock on Monday with a 'cautious' tone. Singh's comments come a week after Palantir's 340 percent gain last year, worth some $150 billion in market value and bolstering its place among the top AI and data analytics players.
But last year, Palantir powered through with its government contracts and commercial ventures and, for the first time, its inclusion in the S&P 500. U.S. revenue has swelled threefold, from $343 million in the same period last year to $499 million in the company's latest quarter. It also saw its commercial revenue grow even faster on the back of its AI-driven AIP Logic platform and its enterprise 'boot camps', which it reports to have generated revenue of $179 million.
While these numbers may suggest that Palantir has quickly become a compelling growth story, Singh was doubtful of the company's valuation, saying it had largely been built by multiple expansions as opposed to fundamental growth. "Palantir has evolved as a top partner for quick AI implementation, but the trading levels of the company are considerably higher than the company's intrinsic value", Singh added.
Singh gave the stock an 'underweight' rating and a $60 per share price target, advising investors that there could be limits to the near-term upside if material estimates revisions' visibility is not available. Now that Palantir, the AI pioneer that was 2024's growth rocket, is going through an era of decelerating growth, analysts are split on whether the company can continue to accelerate or if there are too many risks associated with its valuation.
This article first appeared on GuruFocus.