Palantir Technologies (PLTR) was falling Friday after Credit Suisse analysts downgraded shares of the analytics-software maker to underperform from neutral while raising the stock’s price target to $17 from $13.
Shares of Denver-based Palantir were falling 3.82% to $26.19 in trading Friday.
Analyst Brad Zelnick said in a note to investors titled “Well Ahead of Itself” that he sees “valuation disconnected from fundamentals with the stock now trading over 50% above our previous blue sky scenario.”
“To be clear, we continue to believe Palantir offers a unique data analytics platform, helping organizations solve some of the most complex challenges in the world – including those related to the fight against Covid-19,” Zelnick said.
That said, the analyst added, “with the stock trading at around 46 times EV/CY21 revenue, we see risk/reward skewed to the downside.”
Earlier this month, Palantir garnered a $44.4 million contract from the Food and Drug Administration to assist with drug reviews and inspections, possibly including coronavirus treatments.
Zelnick said he raised his price target “to account for more durable Government sector growth,” as evidenced by the FDA contract “that builds on Palantir’s works around COVID-19.”
Government contracts account for more than half the company’s revenue, and it has taken heat for working with the Immigration and Customs Enforcement agency.
Palantir’s stock climbed more than 70% since the company posted mixed third-quarter earnings last month.
The analyst attributed the increase to the company’s “ability to capture demand for Covid-related work (nothing new), underpinned by a 1-day gain of around $12 billion in market cap on an announced three-year, with the FDA and a press release highlighting the company’s work with Greece.”
“Palantir is unapologetic in its support of its clients, which has, at times – rightly or wrongly – led to unfavorable press/protests,” Zelnick said. “Further, its unique capital structure effectively creates a controlled company with three of the company’s founders indefinitely controlling just under 50% of voting rights.”
As supply of the stock comes to market, the analyst said, “we see these concerns potentially limiting the addressable institutional shareholder base.”