«It's like the Tesla effect»: should we expect new records from Palantir shares?

At the close of trading on June 3, shares of Palantir Technologies, a military AI developer, ended a three-day streak of growth with a new historical record. Since the beginning of the year, they have already risen in price by more than 70% - and this despite the fact that the company has one of the highest price-to-earnings multiples. The fact that investors continue to buy up the company's securities, betting on its AI developments, some analysts compare it to the «Tesla effect»: Palantir has fans who don't pay attention to valuations at all. Nevertheless, such investor optimism contrasts sharply with the consensus of analysts: they forecast the company's quotations to fall by almost a quarter more;

Shares of Palantir closed June 3 trading at a record high of $133.17, completing its third consecutive session of gains. Since the beginning of the year, the company's market value has soared more than 70%, the second best performance among companies in the S&P 500 index, Bloomberg reports. Palantir's market value soared 340% in 2024 and 167% in 2023. Palantir's stock is rising because investors believe in its AI capabilities even though it has one of the highest valuations among U.S. companies, the publication adds. The price-to-earnings multiple of Palantir stock is roughly 205, while the market average is 22. Palantir's valuation is the second-highest among all S&P 500 companies, Bloomberg emphasizes.

Palantir, like Tesla, enjoys the support of retail investors: over the last week its shares became the third most popular after Tesla and Nvidia, Bloomberg writes, citing data from Interactive Brokers. However, rapid growth is fraught with sharp falls, the agency warns. From February to early April, the securities lost more than 40%, repeating the dynamics of other IT giants.

In trading on Wednesday, the company's shares sagged 5.7%, breaking a streak of gains.

«We're seeing a similar effect to Tesla: nobody looks at valuations anymore because the company has real fans,» Paul Marino, chief revenue officer at Themes ETFs, said in a Bloomberg statement. These investors see opportunities for the company in everything that's happening in the world today - whether it's in defense or data and AI, he said. They believe analysts are ignoring Palantir's ability to capitalize on the current geopolitical and macroeconomic context. For example, the company is working with the U.S. Department of Defense, which has expanded its use of the AI-powered Maven target recognition system, as well as with intelligence agencies, Bloomberg notes. Palantir's customers recently included NATO, and the company is launching an AI-based crime detection system with mortgage agency Fannie Mae. The commercial and international customer base is expanding, two key drivers of growth.

«Investors are once again investing in segments with peculiar growth potential - and Palantir fits nicely into that strategy if you're willing to turn a blind eye to the stock's high cost,» says David Wagner of Aptus Capital Advisors. He adds that the company has benefited from the market's shift in interest from hardware to software. Another plus for Palantir, indicating its resilience even under the Donald Trump administration, is its ability to maintain government contracts even amid budget cuts, the analyst added.

However, there are those who warn of the precariousness of the situation. Ted Mortonson, Managing Director at Robert W Baird & Co, emphasizes that the higher the valuation - the higher the expectations of investors from Palantir. Any results that do not meet these expectations can collapse the quotes: for example, as it alreadywas after the publication of the quarterly report. For Palantir to continue growing, it will have to show a really worthwhile result, Mortonson believes. «There should be no mistakes,» he summarizes.

The most recent analyst decision on Palantir stock is araise in the target price from investment bank Daiwa Securities from $90 to $118 on May 13. However, the analyst maintained a Neutral rating, and his new target is still 11% below the last closing price.

Investor optimism stands in stark contrast to analyst sentiment: the average target price on the company's securitiesis $104, down 22% from its closing price on June 3. The vast majority of analysts - 17 out of 28 - have a neutral stance with a Hold rating. Another six suggest Buy (Buy and Overweight ratings), while the remaining five suggest Sell.