Here’s Why Jim Cramer is Bearish on Palantir Technologies Inc (NYSE:PLTR)

We recently published the list of 11 stocks Jim Cramer is bearish on. Palantir Technologies Inc (NYSE:PLTR) ranks 6th in the list. Click to see the full list of 11 stocks Cramer is bearish on. In this article we will take a deeper look at PLTR and find out whether Cramer's thesis holds any weight.

Jim Cramer in a latest program said the "bulls" want the economy to slow down, they want rate cuts as well as a strong demand so that "their companies" won't have to worry about the yield curve and macroeconomic situation. Cramer highlighted that all of this is confusing, as it's not possible to have a weaker economy and yet see companies make a lot of money. Cramer also pointed to the latest data showing slowing manufacturing activity. The Institute for Supply Management's manufacturing purchasing managers index fell to 48.7 in May from 49.2 in April, while analysts were expecting the index to jump to 49.5. Cramer said that the economic activity in the manufacturing sector contracted for the 18^th time in the last 19 months. Cramer said the new orders contraction in May was a "little over frightening."

Talking about the energy sector, Cramer said that he'd buy oil and gas stocks as the economy would sooner or later begin to get back to normal. Cramer also said that it's surprising to see many retailers, including Dick's Sporting Goods, GAP and Best Buy, performing exceptionally well. Cramer also talked about a Wall Street analyst who "double upgraded" Best Buy shares, saying the company "might be the biggest beneficiary" of the AI PCs boom. Cramer said he agrees with this thesis.

For this article we watched several latest programs of Jim Cramer and picked 11 stocks he's bearish on. With each stock we have mentioned hedge fund sentiment. Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).

Palantir Technologies Inc (NYSE:PLTR)

Number of Hedge Fund Investors: 45

Jim Cramer recently said that he finds it "very tough to understand what they (Palantir) do for the governments."

"So, therefore, I am no longer going to say that that's a stock to own. I can't figure out what they do."

A total of 45 hedge funds out of the 919 funds tracked by Insider Monkey reported owning stakes in Palantir Technologies Inc (NYSE:PLTR) as of the end of the first quarter of 2024. The biggest stakeholder of Palantir Technologies Inc (NYSE:PLTR) during this period was D. E. Shaw which had a $310 million stake in Palantir Technologies Inc (NYSE:PLTR).

Palantir Technologies Inc (NYSE:PLTR) recently fell despite beating Q1 estimates and boosting guidance. For the full year Palantir Technologies Inc (NYSE:PLTR) expects revenue between $2.677 billion and $2.689 billion, above the consensus estimate of $2.68 billion and higher than its previous estimated range of $2.652 billion to $2.668 billion.

Palantir Technologies Inc (NYSE:PLTR) is trading at a high P/E multiple of 170, which has alarmed many. However, Palantir Technologies Inc (NYSE:PLTR) bulls believe Palantir Technologies Inc's (NYSE:PLTR) consistent contract wins from the government and AI-related growth catalysts justify this multiple. Analysts are bullish on Palantir Technologies Inc's (NYSE:PLTR) AI platform (AIP), which helps companies and governments in decision making based on AI technologies. In the first quarter alone, Palantir Technologies Inc (NYSE:PLTR) saw a 16% YoY increase in government contracts. US government revenue jumped 12% year over year.

Palantir Technologies Inc (NYSE:PLTR) has increased its U.S. commercial sector growth outlook to 45% from an initial estimate of 40%. Palantir is expected to report sales growth of 20% next year according to Wall Street estimates. The stock is trading at 54X its 2025 EPS estimate of $0.39, which is justified based on the strong growth trajectory.

But if you are worried about valuations, the market is presenting several AI opportunities at attractive levels. If you are looking for an AI stock that is as promising as PLTR but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.

Carillon Scout Mid Cap Fund stated the following regarding Palantir Technologies Inc. (NYSE:PLTR) in its fourth quarter 2023 investor letter:

“Second was another technology stock, Palantir Technologies Inc. (NYSE:PLTR), which rallied earlier in the quarter before pulling back. Sentiment remains positive on Palantir as it has successfully rolled out a new marketing effort called “boot camps” where customers can demo the company’s new artificial intelligence platform (AIP) product. These events have been popular with potential clients, and in many cases it has been reported that customers can develop an artificial intelligence use case in just a few hours. The stock rallied as some expected this successful marketing effort could translate into faster revenue growth. Palantir also landed the coveted National Health Services account in the UK, long rumored, but the delay in the award had weighed on investor sentiment.”

Palantir Technologies Inc (NYSE:PLTR) ranks 6th in Insider Monkey’s list of the Jim Cramer Says You Should Not Buy These 11 Stocks.

 

If you are looking for an AI stock that is as promising as Microsoft but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.

READ NEXT: Michael Burry Is Selling These Stocks and Jim Cramer is Recommending These Stocks.

Disclosure: None. This article is originally published at Insider Monkey.