In the past year Palantir Technologies(NASDAQ:PLTR) share has almost doubled, micron technology(NASDAQ:MU) It has more than quadrupled. However, some Wall Street analysts believe these popular artificial intelligence stocks are vastly overvalued.
brent till jeffries Palantir has set a price target of $70 per share. This represents a 55% decline from the current share price of $157.
william kerwin morning star has set Micron’s price target at $225 per diluted share. This represents a 40% decline from the current share price of $380.
Here’s what investors need to know about Palantir and Micron.
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Palantir develops analytics and artificial intelligence (AI) software that helps public and private sector clients manage and understand complex data. forrester research recognizes the company as a leader in AI platforms and AI decision software, and International Data Corporation (IDC) recognizes Palantir as a leader in decision intelligence software.
Palantir has differentiated itself with its ontology-based software architecture. In this case, the ontology is a decision-making framework that becomes increasingly effective as the underlying machine learning model acquires more data. Most analytical software products are built around reporting and visualization and do little to improve operational efficiency.
Palantir reported strong financial results in the fourth quarter. Revenue increased 70% to $1.4 billion, the 10th consecutive year of acceleration, and non-GAAP net income increased 79% to $0.25 per diluted share. The company also achieved a record Rule of 40 score of 127%. This is unprecedented across the software industry.
Sanjit Singh morgan stanley As I recently wrote, “It’s hard to find a better fundamental story in software than Palantir.” But even the most fundamentally sound companies in the world aren’t worth buying at any price. Palantir stock currently trades at 209 times adjusted earnings, a steep valuation for a company whose adjusted earnings are expected to grow 57% annually through 2027.
Here’s the big picture: Palantir is growing rapidly, and its proprietary software gives it a competitive advantage. However, if Palantir fails to impress the market with its upcoming financial report, the stock could plummet. Investors should still keep their positions in Palantir relatively small, although it’s hard to see the stock falling 55% over the next year without a significant catalyst.
Micron develops memory and storage solutions for personal computers, mobile devices, data center servers, and automotive systems. The company specializes in DRAM memory products, including high-bandwidth memory (HBM), and NAND flash memory products. Both types are important for artificial intelligence.
Micron is the third-largest supplier of DRAM and NAND memory, increasing its share in both categories over the past year, but is also an industry leader. samsung lost market share. However, these share gains were primarily driven by supply shortages rather than competitive moats. Memory chips have become commoditized, meaning chips from different companies are essentially interchangeable, said William Kerwin of Morningstar.
Micron reported strong financial results in the first quarter. Revenue increased 56% to $13.6 billion, and non-GAAP net income increased 167% to $4.78 per diluted share. While impressive, these numbers were driven by higher prices due to lack of supply. But the memory chip industry is cyclical, and shortages will likely eventually lead to oversupply, at which point prices will likely skyrocket.
Micron currently trades at 33 times adjusted earnings, looking cheap for a company whose adjusted earnings more than doubled last quarter. However, once memory chip demand peaks, the market could give the company an even lower multiple. In fact, Wall Street expects revenues to increase rapidly through fiscal year 2027, then decline sharply through fiscal year 2029.
The bottom line is that despite Micron’s size, it lacks a material economic moat, and its stock price could plummet if the market looks beyond the memory chip supply shortage. Investors should keep Micron’s position relatively small, even though it seems unlikely that the stock will fall 40% next year.
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Trevor Jennewine holds a position at Palantir Technologies. The Motley Fool has positions in and recommends Jefferies Financial Group, Micron Technology, and Palantir Technologies. The Motley Fool has a disclosure policy.
2 artificial intelligence (AI) stocks to sell before they drop 40% and 55%, according to Wall Street analysts, posted by The Motley Fool.
