Palantir (PLTR) shares dropped sharply despite strong earnings and increased guidance for the year. Valuation concerns led to a 3.6% decline in morning trading, with a high forward P/E multiple of 465x. The stock is still up 145% since the start of the year, but Jefferies analyst recommends caution due to extreme valuation.

The senior analyst suggests not buying PLTR shares on the dip, as the current valuation can’t be justified even with accelerated growth. His “Underperform” rating warns of a potential crash in share price when the AI hype cycle slows down. The price target of $70 implies over 60% downside, highlighting the unsustainable valuation.

Comparing to Nvidia (NVDA), which has a lower forward P/E multiple despite being an AI leader, Palantir remains overvalued. Even with a projected $8.5 trillion market cap, NVDA’s valuation would still be lower. Palantir’s lack of dividends adds to the valuation risks, with analysts advising caution despite strong earnings release.

Wall Street analysts maintain a “Hold” rating on PLTR stock, with a mean target of $160 indicating potential downside of over 15%. The consensus is to stay on the sidelines at current levels, emphasizing the uncertainty surrounding Palantir’s valuation.

Read more at Yahoo Finance: Should You Buy the Dip in Palantir Stock Today?