Key points
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These companies will need to experience extended periods of strong business growth just to justify their current stock valuations.
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One company has two potential blockbuster products, but brings a lot of uncertainty.
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The other has seen strong momentum in recent years, but it is unclear how long that can last.
Both Tesla (NASDAQ: TSLA) And Palantir (NASDAQ:PLTR) have gotten off to a rough start this year, but some analysts think more pain is in store for their shareholders.
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GLJ Research reiterated its sell rating on Tesla in late February with a 12-month price target of $25.28. That implies a 94% downside from the current share price of around $409.
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RBC Capital’s Rishi Jaluria reiterated his sell rating on Palantir with a $50 price target ahead of its fourth-quarter earnings report. That implies a 63% downside from the current share price of around $135.
While these analysts’ bear cases may represent extreme outcomes, they highlight key risks for investors to consider.
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Tesla: 94% implied disadvantage
Tesla’s current stock price reflects the optimism shareholders have about its future with artificial intelligence and robotics rather than the ongoing operations of its core electric vehicle (EV) business. The market managed to avoid a drop in car deliveries through 2025 after CEO Elon Musk shared plans to expand his autonomous taxi service to “dozens of major cities” by the end of 2026 during Tesla’s fourth-quarter earnings report. Additionally, Musk shared plans to retool some car factories to produce 1 million Optimus robots annually.
But GLJ analysts think investors are too optimistic about how quickly and to what extent consumers will adopt Tesla’s humanoid robots. The researchers say the commercial viability of the robot is far from guaranteed. Furthermore, the company believes that the value of successfully commercializing Optimus is only a fraction of what the market is currently pricing in the stock. As for Optimus, GLJ estimates that the market is pricing in what GLJ believes has a 15% to 20% chance of happening with near certainty.
The market also expects Tesla to become one of the largest providers of taxi transportation in the world. However, that would require it to attract passengers from leading platforms to its own, which hasn’t been easy for existing self-driving competitors. Many have entered into partnerships Uber or Lyft to meet customers where they already are and increase their capital efficiency.
Analysts expect Tesla’s EV deliveries to pick up again in 2026, although perhaps not to 2024 levels. The current consensus is 1.75 million units, which could be lower due to the shift in production capacity to Optimus robots. Meanwhile, the shift from offering the ability to pre-purchase Tesla’s Full Self-Driving (FSD) capabilities to offering it on a subscription-only basis will hurt the company’s gross margins in the short term, but could provide the company with a source of strong and predictable free cash flow down the road, especially if Optimus subscriptions start to have a meaningful impact on Tesla’s financial results.
Tesla’s stock price does not reflect its current business situation. That’s evident from its forward price-to-earnings ratio of about 200 and its forward price-to-sales ratio of about 15, based on analyst revenue estimates for 2026. To invest in Tesla now, you have to believe that it will become a market leader in robotaxis and that there will be strong commercial adoption of its Optimus robots. Otherwise, there is no point in buying shares at this price.
Palantir: 63% implied downside
Palantir has been one of the best-performing AI stocks in recent years, with stellar revenue growth and improved profitability. That feat was made possible by the artificial intelligence platform (AIP), which allows users to connect a large language model and harness the power of the data analytics software using natural language. It has significantly expanded the use cases for Palantir’s software while shortening the learning curve for customers to gain useful insights from it.
Management expects the momentum to continue. After revenue growth of 56% in 2025, the company sees revenue growth accelerating to 61% this year. That premise is supported by the $4.38 billion in remaining US commercial deal value at the end of 2025, up 145% year over year. In addition, operating leverage should ensure further expansion of margins and excellent results. Management expectations suggest adjusted operating margin will increase from 50% in 2025 to 57% in 2026, in line with what the company achieved in the fourth quarter.
RBC’s Rishi Jaluria, however, foresees a number of challenges for the company. First, the value of government contracts, which still make up the majority of U.S. revenues, appears to have declined, based on data checks. That said, he says geopolitical uncertainty could fuel demand from government agencies for Palantir’s services in the long term. Secondly, he is not confident in the prospects for sustainable growth of the commercial segment, noting that there are indications of customer withdrawal from the business.
Despite impressive results and continued momentum from both government and commercial contracts, it’s Palantir’s stock price that makes it risky. The stock trades for more than 100 times forward earnings estimates and more than 44 times 2026 revenue expectations. Investing in Palantir at this price requires an expectation that the company will continue to grow at a breakneck pace for many years to come. Some investors may be encouraged by the excellent fourth-quarter results and management’s positive outlook. But Jaluria believes the risk/reward profile is “downward skewed” at Palantir’s current share price.
Should You Buy Palantir Technologies Stock Now?
Consider the following before purchasing shares in Palantir Technologies:
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Adam Levy holds positions at Uber Technologies. The Motley Fool holds positions in and recommends Lyft, Palantir Technologies, Tesla, and Uber Technologies. The Motley Fool has a disclosure policy.
