TLDR
- Two Wall Street analysts upgraded outlook on Palantir stock with price targets ranging from $208 to $235
- Citi expects defense modernization and AI platform adoption to drive 70-80% revenue growth this year
- Third quarter U.S. commercial revenue jumped 121% as enterprise customers adopt AIP at rapid pace
- PhillipCapital argues stock now trades below historical valuation average after recent decline
- Palantir expanded operations from 60 industry sectors in 2021 to 90 sectors by end of 2024
Wall Street is taking another look at Palantir Technologies. Two analysts just issued positive calls on the stock.
The shares have fallen 17% over the last three months. Some investors worried the valuation had stretched too far.
But Citi’s Tyler Radke sees things differently. He maintained his positive stance and bumped his target price to $235.
That would mean gains of 42% from where the stock closed Tuesday. Radke thinks the market is missing something important.
He believes Palantir has moved beyond normal valuation frameworks. Traditional metrics don’t capture what’s happening with the business.
The company is posting rapid growth while expanding profit margins. That combination is rare, especially at this scale.
Radke highlighted the traction Palantir’s AI platform is gaining. Both commercial clients and government agencies are signing up fast.
Defense spending is ramping up across multiple countries. Government IT systems need modernization. Palantir is positioned to benefit from both trends.
The analyst thinks the government business will grow 51% this year. Total company revenue could climb 70-80% in 2026.
Palantir Technologies Inc., PLTR
Platform Adoption Accelerates
The third quarter results show why analysts are getting excited. Revenue climbed 63% compared to last year.
The U.S. commercial business really stood out. Sales in that segment jumped 121% year-over-year.
Growth accelerated from the previous quarter too. Sequential revenue rose 29% in commercial.
This segment now makes up 34% of Palantir’s total business. Two years ago it was a much smaller piece.
The Artificial Intelligence Platform is driving most of this expansion. Companies are finding real use cases for the technology.
Even government customers are starting to use AIP. They saw the results in commercial deployments and wanted the same capabilities.
Palantir’s backlog tells a good story about future revenue. Remaining performance obligations hit $2.6 billion.
That’s up 65% from the prior year. These represent signed contracts that will convert to revenue over time.
Management lifted their full-year outlook. They now expect revenue around $4.4 billion for a 53% increase.
The U.S. commercial segment should reach $1.43 billion. That would represent 104% growth for the full year.
A Different Way to Value the Stock
PhillipCapital’s Paul Chew just started covering Palantir. He came out with a buy rating and $208 target price.
Chew thinks comparing Palantir to other software companies doesn’t work. The business model is too different.
Instead, he looks at how Palantir has traded relative to itself over time. By that measure, the stock looks cheaper now.
The forward price-to-earnings ratio hit 309 times back in October. Today it sits around 170 times.
That’s below the one-year average of 190 times. The recent selloff in AI stocks pushed valuations down across the board.
Chew calculated that Palantir has captured only 2.4% of its target market. The addressable opportunity was $119 billion back in 2020.
The AI software market is growing over 25% annually. That means the total opportunity is actually bigger now than it was then.
The analyst projects revenue of $4.2 billion in 2025. That works out to 47% growth year-over-year.
Profit margins are improving too. Net income is on track to nearly double this year.
Commercial revenue is now growing faster than government sales. Chew expects increases of 51% and 43% respectively.
Palantir keeps entering new industries. The company worked with 60 different sectors in 2021.
By 2024 that number reached 90 sectors. Each new industry represents additional revenue opportunities.
The stock trades at 388 times trailing twelve-month earnings. For a company growing this fast, supporters say that’s justified.
Palantir scored 114% on the Rule of 40 in the third quarter. This combines revenue growth rate plus profit margin percentage.
Software companies aim for scores above 40%. Palantir is nearly triple that threshold.
Most analysts remain cautious on the stock. The consensus rating is neutral with six buy ratings, ten holds, and two sells.
The average Wall Street price target is $189.94. That suggests 21% upside from current prices. Radke and Chew are both above this mark.
The stock has climbed 2,190% over three years. But the path wasn’t straight up. Palantir has experienced at least ten separate pullbacks of 20% or more during that stretch.
