Shares of Palantir Technologies Inc (NYSE:PLTR) dropped more than 5% on Monday after Morgan Stanley (NYSE:MS) analysts initiated coverage with an 'Underweight' rating and a $60 price target.
Analysts cited concerns about the stock’s valuation and limited near-term growth potential despite its 340% surge in 2024, which Morgan Stanley (NYSE:MS) noted was driven primarily by multiple expansion rather than substantial revenue gains.
Palantir added around $150 billion in market value last year, boosted by optimism around its government contracts, inclusion in the S&P 500, and rising demand for its AI-driven technologies, such as its AIP Logic platform.
However, analysts noted that growth in its commercial business, while strong, is unlikely to contribute as significantly to future sales as its government segment.
The company projects 2024 revenue of $2.8 billion, an 8% increase from earlier forecasts, but analysts warned that free cash flow growth, pegged at 41%, is more a result of cost controls than revenue acceleration.
Analysts also flagged slowing business momentum heading into 2025, with management signaling increased investments that may limit further expansion.