Only one S&P 500 stock has outperformed Palantir Technologies (NASDAQ: PLTR) so far this year. But it’s a pretty close contest. NRG Energy‘s shares have soared around 76% year to date, while Palantir’s gain lags by only a few percentage points.
Despite Palantir’s tremendous momentum, many analysts aren’t upbeat about the stock’s near-term prospects. But do billionaires Ken Griffin and Izzy Englander know something about Palantir that Wall Street doesn’t?
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Buying Palantir stock hand over fist
At the end of 2024, Griffin’s Citadel Advisors owned 441,755 shares of Palantir. In the first quarter of 2025, the hedge fund more than tripled its position in the artificial intelligence (AI) software provider.
Englander is arguably even more enthusiastic about Palantir. In the first quarter, his Millennium Management hedge fund more than quadrupled its stake to 1,312,758 shares.
Both successful investors also employed options strategies with the stock. Griffin’s and Englander’s hedge funds held both call and put options for Palantir at the end of the first quarter.
While these two billionaires are indisputably buying Palantir Technologies shares hand over fist, the stock doesn’t make up a large percentage of their portfolios. That’s not surprising, though, considering that Griffin’s Citadel Advisors has more than 5,800 holdings, while Englander’s Millennium Management has more than 3,900 holdings.
But Wall Street isn’t so upbeat
Wall Street doesn’t seem to share Griffin’s and Englander’s optimism about Palantir. The consensus 12-month price target for the stock among analysts surveyed by LSEG is roughly 22% below the current share price.
Only one of the 25 analysts polled by LSEG in June rated Palantir as a “strong buy.” Another three analysts recommended buying the stock. However, seven analysts viewed Palantir as an “underperform” or advised investors to sell. Fifteen analysts recommended holding the stock.
Why isn’t Wall Street as enthusiastic about Palantir as the two billionaire hedge fund managers seem to be? Probably the biggest objection for analysts is valuation. Palantir’s shares trade at nearly 244 times forward earnings. I’d say that was a nosebleed forward multiple, but that might not be a strong enough description.
Most analysts don’t seem to think Palantir’s growth prospects justify this sky-high valuation, either. The software company’s price-to-earnings-to-growth (PEG) ratio based on analysts’ five-year earnings growth projections is 4.22. PEG ratios generally need to be below 1.0 for a stock to be considered attractively valued.
Image source: Getty Images.
Who’s right?
Maybe Griffin and Englander do know something about Palantir that most analysts on Wall Street don’t. Perhaps the billionaire investors expect much stronger growth from the company than analysts forecast. Maybe they agree with Wedbush’s Dan Ives, who predicts that Palantir’s market cap will more than triple to $1 trillion over the next two to three years.
I suspect, though, that the more bearish opinion held by Jefferies analyst Brent Thill is a better take. Thill noted on CNBC’s Closing Bell Overtime show a few weeks ago that no tech stock has ever been able to sustain a super-high multiple like Palantir’s.
Like Thill, I don’t question the strength of Palantir’s underlying business. The company makes great software. It should have strong growth prospects. Palantir might even enjoy a bonanza if President Donald Trump’s Golden Dome missile defense system is funded by Congress and the company wins a lucrative contract to help build it. But this growth still doesn’t seem to be enough to justify Palantir’s valuation, in my view.
I also wonder whether Griffin and Englander are really as bullish about Palantir as their recent buying indicates. We don’t know the detailed information about the option trades they’ve made. It’s possible that those options significantly hedge their positions in Palantir. After all, hedging is what hedge funds do. Maybe, just maybe, Griffin and Englander are more closely aligned with the consensus Wall Street view of Palantir than meets the eye.
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Keith Speights has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Palantir Technologies. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
