Why Palantir Technologies Charged Higher on Wednesday
Key Points
Palantir received (another) upgrade from a Wall Street analyst.
The company has been winning converts in the wake of last month's blockbuster financial report.
While the stock is still expensive, Palantir is in a class by itself.
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Palantir Technologies (NASDAQ: PLTR) stock surged sharply higher today, gaining as much as 6%. As of 11:32 a.m. ET, the stock was still up 4.6%.
The artificial intelligence (AI) software and data mining specialist is one of the most divisive stocks on the market today, but Palantir is gradually winning over skeptics.
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Another convert
Mizuho Securities analyst Gregg Moskowitz upgraded Palantir stock to outperform (buy) from neutral (hold) while maintaining his price target of $195, which represents potential gains for investors of 47% compared to Tuesday's closing price. The analyst noted that the company's sales growth and margin expansion are "unlike anything else in software." He goes on to say that Palantir's AI offering is "in a category of one."
Moskowitz had previously expressed concerns that Palantir would eventually "be subject to meaningful multiple reversion." However, after the stock's recent 36% decline, the analyst feels the risk-reward scenario is more compelling.
This reversal comes just days after Palantir received a rare double upgrade. Freedom Capital Markets analyst Almas Almaganbetov upgraded to stock from sell to buy, issuing a price target of $170. This suggests potential upside of 28%.
The analyst pointed to Palantir's recent results, which sailed past both management's guidance and analysts' consensus estimates, as evidence of sustained AI demand fueled by accelerating adoption of the company's Artificial Intelligence Platform (AIP).
Palantir has been winning over converts on Wall Street. In late January, of the 26 analysts who offered an opinion, only six rated the stock a buy or strong buy. Now, 13 of 27 analysts believe the stock is a buy or strong buy. That's something of a rapid reversal, brought on by Palantir's acceleration growth.
To be clear, Palantir is still expensive, selling for 210 times earnings, but that's down significantly from a multiple of 396 late last month. The stock will likely continue to be a battleground, but despite its high price tag, Palantir is in a class by itself.
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Danny Vena, CPA has positions in Palantir Technologies. The Motley Fool has positions in and recommends Palantir Technologies. The Motley Fool has a disclosure policy.
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