Morgan Stanley has taken the step of downgrading Palantir Technologies Inc. (NYSE:PLTR), highlighting the prevailing skepticism on Wall Street towards the software firm that has positioned itself as a key player in the realm of artificial intelligence.
The company’s shares experienced an 8.3% decline on Thursday. Despite Palantir’s impressive 130% surge in value this year, a result of robust investor interest in AI, the stock currently rests 25% below the peak it achieved earlier in the month. Furthermore, it has undergone a substantial drop of over 60% from its 2021 high.
According to analyst Keith Weiss, the stock’s current valuation is emblematic of the “AI euphoria.” He noted, however, that the positive impact of this trend will require a significant amount of time to materialize fully.
“While the act of introducing a product to the market sufficed to ignite investor confidence over the past six months, the focus is now shifting towards discerning those companies capable of promptly and effectively translating these offerings into revenue,” Weiss conveyed to clients. “In this regard, Palantir remains in its early stages, as the company has explicitly indicated its ongoing deliberations on how to monetize its solution.”
In recent weeks, Palantir offered a sales projection that was viewed as underwhelming, especially given its prior statement about the unprecedented demand for a new AI tool.
Morgan Stanley has revised its assessment from “equal weight” to “underweight,” contributing to a situation where half of the analysts hold a “sell” recommendation for Palantir, a notably high proportion. In contrast, there are four analysts advocating a “buy” rating and five expressing a neutral stance.
On the whole, the consensus recommendation for the stock, which serves as an indicator of the balance between “buy,” “hold,” and “sell” ratings, stands at 2.44 out of 5. This is the lowest rating among the 117 constituents of a software index.
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