Palantir Is Back on Wall Street’s Buy List After 38% Plunge
(Bloomberg) — Wall Street is about as bullish toward Palantir Technologies Inc. as it’s ever been, as the potential for growth in the company’s defense business brings enthusiasm back to the stock following a four-month selloff.
The data-analysis software company, which gets about half its revenue from US government and military contracts, jumped 5.8% on Monday to bring its four-session gain to 13%. The rally started last week as President Donald Trump ratcheted up threats against Iran, and is continuing amid military strikes by the US and Israel on the country. The Trump administration expects the fighting to potentially last for weeks, while Iranian officials say it will probably go on for longer.
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“The positive move in the stock is an emotional reaction to how Palantir is positioned with the government and military,” said Tim Pagliara, chief investment officer at Capwealth Advisors, which owns the company’s shares.
“I don’t think the war represents a meaningful change to Palantir’s fundamentals, but it validates Palantir’s position within the government, and it positions them for continued growth and adoption in many other areas of the military,” he said. “The war really speaks to the theme of how the company is so embedded in the government and the moat it has there.”
Palantir shares fell 1.6% on Tuesday amid a broader selloff in equity markets.
The stock, which has long been treated skeptically by analysts due to its extreme valuation, was upgraded by at least eight firms last month amid a slump that sent Palantir shares down 38% from a record high on Nov. 3 to a Feb. 24 low. The plunge came amid a barrage of criticism from investor Michael Burry of fame centered on concerns about the company’s valuation and potential for growth, as well as scrutiny of its business dealings with US Immigration and Customs Enforcement and the Department of Homeland Security.
Palantir has been a major US government contractor for years, working largely with the military and ICE. In 2024, it received a $100 million contract for its Maven Smart System, an AI-enabled battle management platform system that aggregates military data. And last summer, the company received a $10 billion contract from the US Army that the government said will reduce procurement timelines, “ensuring soldiers have rapid access to cutting-edge data integration, analytics and AI tools.”
Even before the airstrikes on Iran began, Wall Street analysts were growing optimistic about Palantir. While concern about the potential for AI to disrupt the software industry helps explain some of the stock’s plunge from a record, the company is widely viewed as a beneficiary of AI, a view which was validated by its latest robust earnings.
“Palantir has shown a path to durable growth in a really challenging environment,” said Dave Mazza, chief executive officer at Roundhill Investments, which holds Palantir shares in the Roundhill Generative AI & Technology ETF. “The upgrades show that fundamentals are pretty strong.”
The risk, however, remains the company’s pricey market valuation. It’s among the five most-expensive stocks in the S&P 500 Index, with a multiple of roughly 104 times expected earnings over the next 12 months. And at 45 times estimated sales over the next 12 months, it’s the priciest stock in the benchmark. Of course, that’s down from a price-to-earnings ratio of 247 times on Oct. 30 and a price-to-sales ratio of 89 on Aug. 8, making the shares seem like a relative bargain from where they were not that long ago.
“It makes sense that if analysts liked the fundamentals at $200, they’ll like them more at $140,” Mazza said.
The analyst upgrades, along with a new buy rating from Rosenblatt Securities, have dramatically improved sentiment about the company. Of the 31 analysts following Palantir, 20 rate the stock a buy, nine have hold ratings and two rate it a sell, according to data compiled by Bloomberg. At the start of the year, just nine analysts had buy ratings. The consensus price target of roughly $192 suggests a gain of about 32% from Monday’s close.
Among the firms that raised their ratings on the shares last month were UBS, Mizuho Securities, HSBC, Freedom Capital, Daiwa, Northland, Baird and William Blair.
UBS analyst Karl Keirstead was emblematic of the new enthusiasm, calling Palantir “the premier growth story in software and a company that is at the nexus of the two most powerful spending trends — AI and data,” in a note to clients on Feb. 26. He added that the multiple is “finally at a level that many investors can make a strong valuation case for the stock.”
That view was apparent in Palantir’s earnings report last month, which beat Wall Street’s expectations and featured a revenue forecast that was much stronger than anticipated. Palantir’s projected revenue expansion of 73% over the next 12 months ranks fifth in the S&P 500, according to data compiled by Bloomberg.
All of which gives Palantir significant momentum heading into a period of geopolitical uncertainty. With investors wondering how long the war in Iran will last and what its impact will be on markets and economies around the world, Palantir is one of the rare companies that’s actually positioned to thrive in the face of disruptions.
In fact, the fighting could create more global demand for the company’s products and services.
“The conflict could help them land new customers, especially within the context of any broader Middle East impact,” said Mandeep Singh, senior technology analyst at Bloomberg Intelligence. “One of the major use cases that has emerged for Palantir software is in assessing supply chain risk on the commercial side. Supply chain risk is going to be huge for companies exposed to the Middle East, and those could become customers. So even though we had geopolitical tensions before, there is new urgency because of the war.”
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