Title: Should You Buy Palantir Stock Amid the AI Frenzy?
Investors who missed out on the earlier surge of Palantir Technologies (NYSE:PLTR) stock, driven by the booming artificial intelligence (AI) market, may be tempted to jump in and buy at any price. However, it may be wise to wait for a more opportune entry point.
Currently trading at around $15 per share, Palantir stock has shown resilience but faces the challenge of sustaining and adding to its recent gains. The upcoming earnings release on August 8th could be a catalyst for the stock to reach even higher price levels.
Sell-side analysts have already revised their forecasts for the current quarter, following Palantir’s strong performance in the previous quarter. However, replicating such success might prove difficult. If the company can demonstrate continued success in capitalizing on AI and machine learning trends, particularly in commercial sales rather than government contracts, it could lead to another post-earnings surge in the stock price.
While the allure of AI has driven excitement and speculation in the market, it is important to exercise caution. Speculative waves tend to peak and eventually decline, and the same could occur with the AI sector. If this happens, stocks that have benefited from the AI trend, including Palantir, may experience a deflation in prices.
However, it is crucial to note that even if there is a market correction or bubble burst, it does not signify the end of the underlying trend. Just as the popularity of the internet persisted after the dotcom bubble burst and the electric vehicle industry continues to thrive after the EV bubble peaked, AI is here to stay.
If AI stocks do correct significantly, Palantir may retrace back towards its previous lows. However, this does not mean the stock will remain at rock-bottom prices indefinitely. As the AI market matures and commercial adoption of the technology accelerates, Palantir shares could see substantial growth in the years ahead.
Investors who are bullish on AI should consider buying Palantir stock on any major dips. While it may not drop to a low valuation of under 15 times earnings, purchasing at more reasonable price levels of 25, 30, or even 40 times earnings could prove to be a worthwhile investment.
With the potential for early movers in the AI space to dominate the market, a short-term correction following the AI mania could pave the way for long-term profitability with Palantir stock.
According to Portfolio Grader, PLTR stock currently holds a B rating.
