Why Palantir Technologies Hit a New All-Time High on Wednesday

Palantir Technologies (NASDAQ: PLTR) stock continued its epic run on Wednesday, climbing as much as 5.4%. As of 3:37 p.m. ET, the stock was still up 3%.

The artificial intelligence (AI) software and data mining specialist has climbed to new heights several times in recent weeks, with its stock notching a new all-time high on Wednesday. That puts the stock up more than 80% so far this year. The catalyst behind today's move was a reluctant nod from a Wall Street analyst.

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Better late than never

Mizuho analyst Matthew Broome kept an underperform (sell) rating on Palantir stock, but raised his price target for Palantir to $116, up from its previous level of $94. For those keeping score at home, that's roughly 12% below the stock's closing price on Tuesday, so the analyst is obviously playing catch-up.

Broome cited Palantir's "strong recent execution and significant upward revisions" for his price target increase. The analyst also noted the company's "strong strategic positioning with large customers and potential for further accelerated growth in future years."

So, if the analyst is so bullish on Palantir, why maintain the sell rating? In a word: valuation.

Palantir stock is currently selling for 594 times earnings and 109 times sales. With multiples of that magnitude, it isn't for the faint of heart. Even factoring in the company's accelerating growth, it sports a price-to-earnings growth (PEG) ratio of 6, when any number higher than 1 is overvalued.

Don't get me wrong: I'm a dyed-in-the-wool Palantir bull. However, valuation is a fickle mistress, and any failure by the company to execute -- real or perceived -- could bring the stock crashing down. In fact, I wouldn't be surprised to see Palantir stock get cut in half at some point over the next year -- before climbing to even greater heights.

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Danny Vena has positions in Palantir Technologies. The Motley Fool has positions in and recommends Palantir Technologies. The Motley Fool has a disclosure policy.