2 High-Flying Artificial Intelligence (AI) Stocks to Sell Before They Plummet 74% and 30%, According to Select Wall Street Analysts

Wall Street analysts are expressing increasing concern over the "sky-high valuations" of high-flying AI stocks Palantir (PLTR) and CrowdStrike (CRWD), despite their robust operational results. Palantir, up 2,290% since early 2023, faces calls for a potential 74% decline from its current price due to its 228x forward earnings and 78x revenue multiples. Similarly, CrowdStrike, which has surged 352%, has seen analyst downgrades and a lowest price target implying a 26% drop, with its 22x sales and 135x earnings multiples raising broader market caution on stretched AI valuations.

Analysis

A significant valuation disconnect is emerging for key AI beneficiaries Palantir (PLTR) and CrowdStrike (CRWD), despite their robust operational execution. Palantir has demonstrated exceptional growth, with a 71% increase in U.S. commercial revenue and an adjusted operating margin of 44% in its first quarter, yet its stock performance—a 2,290% climb since the start of 2023—has pushed its valuation to an extreme 228 times forward earnings and 78 times forward sales. This has prompted significant caution from Wall Street, with one analyst from RBC setting a price target that implies a 74% potential downside. Similarly, CrowdStrike has posted strong results, with 20% annually recurring revenue growth in Q1 and an expectation for acceleration, but its 352% stock surge has resulted in a valuation of 135 times forward earnings and 22 times forward sales. This has led to a deterioration in analyst sentiment, with buy ratings declining from 41 to 31 over three months and a low-end price target suggesting a 26% drop. The core concern for both companies is that their current market capitalizations have substantially outpaced their impressive financial growth, making it difficult to justify them being among the most expensive stocks in the market.

Key Decisions for Investors

• Investors should critically scrutinize the extreme valuation multiples for Palantir and CrowdStrike, such as the forward P/E ratios of 228x and 135x respectively, as these are the primary drivers of analyst concern.
• Given the significant downside potential highlighted by analysts—up to 74% for PLTR and 26% for CRWD—it may be prudent for those with substantial gains to consider trimming positions or implementing risk management strategies.
• Closely monitor future earnings reports for a 'substantial beat-and-raise' quarter, as this appears to be the only catalyst that could sustain these valuations, and track any further shifts in Wall Street analyst ratings for signs of changing sentiment.