Palantir (NYSE:PLTR) has richly rewarded its investors in 2024 and emerged as a clear AI winner. Earlier this week, the company provided further evidence of its success by reporting a strong Q3 report and raising its outlook for the year.

The big data specialist beat expectations across all key metrics and investors showed their satisfaction, pushing shares up 34% in the last two trading sessions. This brings the stock's year-to-date gain to an unlikely 223%.

Management remains extremely confident in Palantir's positioning. The company said it was “completely drained” in the third quarter, pointing to strong AI adoption in the US as a key factor. Palantir also highlighted the success of AIP boot camps in accelerating the company's land-and-expansion strategy and significantly shortening sales cycles.

Mizuho's Gregg Moskowitz, an analyst ranked in the top 3% of stock professionals on Wall Street, praised a “very good” quarter for Palantir. “Given its positioning and strong YTD execution,” the 5-star analyst continued, “there is no denying that PLTR deserves a premium valuation.”

But what exactly is the premium valuation? The stock's rise has resulted in a “very high” valuation of more than three times that of other enterprise software stocks covered by Mizuho analysts. “Valuation cannot and should not be irrelevant,” Moskowitz continued, “and we are finding it increasingly difficult to justify PLTR's high multiple, which we believe already ignores significant acceleration from consensus expectations.”

As a result, Moskowitz maintained an Underperform (i.e. Sell) rating on the shares, and although he raised the price target from $30 to $37, that value is 46% below the current share price. (To view Moskowitz's track record, click here)

Brian White of Monness, another top Street analyst ranked in the top 1%, is even more scathing about the valuation. “Palantir's enterprise value-to-sales multiple of 26x dwarfs our software group average of 6.1x while laying claim to the highest valuation in our universe,” he said. “Furthermore, the stock trades at a 39% EV/sales premium to NVIDIA, despite Palantir's lower revenue growth rate and operating margin profile.”

The 5-star analyst remains unconvinced by CEO Alex Karp's confident tone, saying the earnings release is “drenched in another round of AI propaganda.” And while White says that Palantir, like other software companies, has long been driving innovation with predictive AI, he argues that this recent AI hype cycle has been driven primarily by generative AI and Palantir's “revenue risk” in this segment remains uncertain.

“In the end,” White concluded, “we believe this opacity has led the market to conflate the different types of AI, giving Palantir a dreamy valuation in the process.”

Accordingly, White maintained his Sell rating on PLTR shares, while his $18 price target factored in a huge 68% decline from current levels. (To view White's track record, click here)

Overall, Street ratings broke down into 4 Buys, 7 Holds, and 5 Sells, all culminating in a consensus rating of “Hold.” However, this rating could just as easily be a Sell, as the average target of $29 suggests the stock will fall 48% in the coming months. (See Palantir stock forecast)

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Disclaimer: The opinions expressed in this article are solely those of the featured analysts. The content is for informational purposes only. It is very important to do your own analysis before investing.