Palantir Technologies has been downgraded at Morgan Stanley, which is the latest signal of Wall Street’s skepticism about this company specializing in software development and positioning itself as a major player in the sphere of artificial intelligence.
The share price of this firm on Thursday, August 31, showed a drop of 8%. At the same time, the company’s business continues within the dynamics of development. Since the beginning of 2023, Palantir has grown by more than 130%. This impressive result is due to the enthusiasm of investors who believe in the potential of artificial intelligence as the main technology of the current era. This belief is justified from the point of view of modern realities, but a company working in a promising sphere will not necessarily be successful, however, there is no reason to believe that Palantir will suffer a similar fate, and its efforts will be in vain.
Analyst Keith Weiss says that the valuation of the company’s shares is a reflection of the euphoria associated with the concept of perception that defines the understanding of AI as a promising and successful technology by the collective consciousness. At the same time, the expert noted that any tailwind takes time to materialize. Translated from the language of symbols and images, this means that any prospect does not bring instant results, but manifests itself in the form of concrete achievements in the long term.
The analyst also noted that the appearance of the product on the market is enough to form a positive mood in the investment environment. This is exactly the trend in the sphere of AI that has been observed over the past six months. He stressed that currently investors’ attention is focused on companies that offer income generation in the most timely and effective ways. Palantir, according to him, in this case, is the firm from which it is too early to expect financial efficiency. The company made it very clear that it has yet to form a monetization strategy.
In August, Palantir released a sales forecast that was described as disappointing. By the end of 2023, the firm expects to receive revenue of $ 2.21 billion. Analysts at Citigroup said they were not impressed with the forecasts and noted that the company’s revenue growth rate is very slow. At the beginning of this year, the firm, in a certain sense, aggressively advertised its capabilities in the area of artificial intelligence. In part, high-profile marketing has formed a perception model within which what is commonly called inflated expectations have arisen. This does not mean that the company promised something that it does not have. Bright advertising campaigns often cause expectations that somewhat exceed reality, but still coincide with it to a certain extent.
At the same time, the company’s forecast for adjusted operating income turned out to be more encouraging. The firm expects to fix this figure at $576 million, which exceeds Wall Street’s expectations of $530.3 million.
Morgan Stanley downgraded Palantir from equal weight to underweight. The stock recommendation is 2.44 out of 5.
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