Should You Buy Palantir Technology Stock Before Dec. 13? Wall Street Has a Compelling Answer That Might Surprise You.

Last month, Palantir announced it was transferring its stock to the Nasdaq exchange. At the time, it noted, “Upon transferring, Palantir anticipates meeting the eligibility requirements of the Nasdaq-100 Index.”

While this might sound like a non-event, it could be the catalyst that boosts the stock once more. Investors may recall there was a great deal of excitement when Palantir was selected for inclusion in the S&P 500 in late September.

Many investors view this as a validation of their investing theses, as the companies selected must meet certain profitability and liquidity criteria. Furthermore, exchange-traded funds (ETFs) and other passive-investment vehicles that track these indexes must buy shares in order to mimic the returns of the index in question.

The annual rebalancing of the Nasdaq-100 index is scheduled to be announced on Dec. 13, with changes to take place on Dec. 20. Many on Wall Street believe Palantir tops the list for inclusion. If Palantir becomes part of the Nasdaq-100 index, the stock could once again get a boost.

Despite Palantir’s brilliant execution and accelerating financial results, many on Wall Street are bearish on the stock, and their reasoning is understandable. The parabolic move in the stock price has come with a commensurate increase in its valuation. The stock is currently trading for 175 times forward earnings and 44 times forward sales (as of this writing), which is lofty by any stretch of the imagination.

However, these metrics fall short when evaluating a high-growth stock like Palantir. When measured using the more appropriate forward price/earnings-to-growth ratio (PEG) — which factors in Palantir’s surging growth — its valuation clocks in at 0.58, when any number less than 1 is the standard for an undervalued stock.

Still, many on Wall Street are taking a pass. Of the 19 analysts who offered an opinion on Palantir so far in December, only four rate the stock a buy or strong buy, while eight recommend holding, and seven rate it underperform or sell. That means 79% don’t think Palantir is a buy right now.

One representative take was issued by Jefferies analyst Brent Thill. The analyst calls Palantir the “most expensive” stock in software, a sentiment echoed by many of his colleagues. He also warns of tough comps ahead.

That said, the analyst issued a rare mea culpa, writing, “We underestimated the momentum that [Palantir] was able to garner after the launch of Artificial Intelligence Platform (AIP) boot camps,” he wrote, citing the company’s multiple-quarter stretch of accelerating growth. Argus Research analyst Joseph Bonner echoed his concerns, noting, “The market tends to punish highly valued tech stocks.”

That said, Wedbush analyst Dan Ives maintains an outperform (buy) rating and recently boosted his price target to $75, representing potential upside of 13% (as of this writing). He said the company’s AIP boot-camp strategy is “game-changing.” BofA analyst Mariana Perez Mora concurs, rating the stock a buy with a $75 price target, saying Palantir is “poised to dominate.”

Those bulls aside, the consensus is clear. Wall Street believes Palantir stock is too expensive, and any failure on the company’s part — real or imagined — could send the stock plunging.

Investors who already own Palantir stock (like I do) should adopt and maintain a long-term approach to investing and hang on for dear life. It’s clear that Palantir has an AI solution that speaks to customers, and given the accelerating adoption of AI, that will likely continue. However, there will certainly be bumps in the road.

For investors who feel the train has left the station, take heart. One effective strategy is to buy a small stake in Palantir and watch for future opportunities to add at better value points. If that stock falls in the future — which is almost certainly the case — astute investors will have the opportunity to add to their positions at a more attractive valuation.

Dollar-cost averaging is another helpful strategy, which helps investors build a position over time, adding more shares when the price is lower and fewer when the valuation is higher.

Investors will benefit from a long-term outlook but will need a strong constitution to withstand the volatility that will no doubt be part of Palantir’s future.

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Bank of America is an advertising partner of Motley Fool Money. Danny Vena has positions in Palantir Technologies. The Motley Fool has positions in and recommends Bank of America and Palantir Technologies. The Motley Fool has a disclosure policy.

Should You Buy Palantir Technology Stock Before Dec. 13? Wall Street Has a Compelling Answer That Might Surprise You. was originally published by The Motley Fool