PLTR Stock Falls Palantir Reports Slowing Sales End

Palantir's stock valuation is high and facing tough competition, leading to a 13% drop in early trading. Unrealistic expectations abound.

Palantir (NASDAQ:PLTR) recently reported first-quarter revenue that beat analysts' expectations and even raised its full-year sales guidance slightly. Despite this positive news, PLTR stock is down 13% in early trading, leading some on Wall Street to suggest that expectations for AI companies like Palantir may have been too high.

While Palantir provides data-analysis tools and a platform for AI utilization, its revenue growth from U.S. companies slowed to 32% year-over-year in the first quarter, down from the 70% increase seen in the previous quarter. The company raised its full-year sales guidance range to $2.677 billion - $2.689 billion, but analysts were expecting slightly higher numbers.

Many investors had unrealistic hopes for Palantir, while other AI stocks like Accenture (NYSE:ACN), Booz Allen (NYSE:BAH), IBM (NYSE:IBM), and C3.ai (NYSE:AI) are better positioned in the market. These companies have developed AI chips and unique services over many years, facing less competition than Palantir. Additionally, cloud-infrastructure giants like Microsoft (NASDAQ:MSFT) have established customer bases and lower valuations.

The exuberant enthusiasm for Palantir on Wall Street has been viewed as overdone, with a forward price-earnings ratio of 81 times and a price/sales ratio of 26 times. Companies with specialized AI products and established customer bases may have a competitive advantage over Palantir in the long run.