Palantir Stock Investors Just Got Great News from Wall Street

Palantir (NASDAQ: PLTR) has been on an epic run in recent years, but it hasn't all been smooth sailing. The data analytics and artificial intelligence (AI) specialist has delivered stock price gains of 1,860% over the past three years, but has fallen 20% or more on at least 10 occasions. That's not all. Between 2021 and 2023, Palantir stock plunged more than 80% -- so it isn't for the faint of heart.

The stock currently sells for a head-turning 244 times earnings and 117 times forward earnings (as of this writing), yet one Wall Street analyst sees Palantir as a "premier growth story."

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UBS thinks Palantir is a buy

UBS analyst Karl Keirstea recently raised eyebrows, maintaining a buy rating on the stock and raising his price target on Palantir to $200. For those keeping score at home, this represents potential upside for investors of 29% compared to Tuesday's closing price. The analyst didn't provide commentary for his latest price target hike, but was vocal about his reasoning when he upgraded the stock less than three weeks ago.

Keirstea pointed out that Palantir stands "at the nexus of the two most powerful spending trends -- AI and data." He also cites channel checks suggesting that Palantir is "facing a very strong demand backdrop."

I think the analyst's assessment is spot on. In the fourth quarter, Palantir's revenue of $1.4 billion grew 70% year over year, marking its 10th consecutive quarter of accelerating growth, but that's just the tip of the iceberg. Its U.S. commercial segment -- which includes its flagship Artificial Intelligence Platform (AIP) -- soared 137% year over year and 28% sequentially, and now accounts for 36% of Palantir's total revenue. Enterprise users and government agencies alike are leveraging AIP for real-world AI solutions.

Let's not forget the company's remaining performance obligation (RPO) -- contractually obligated sales not yet booked as revenue -- which soared 143% to $4.2 billion, increasing by a massive $1.6 billion in the fourth quarter alone. This helps set the stage for Palantir's future growth.

That's not all. Management's bullish guidance suggests the company's accelerating growth will continue. Palantir's forecast calls for revenue growth of 60% to roughly $7.19 billion in 2026, while its outlook for U.S. commercial revenue calls for revenue of $3.14 billion, or growth of at least 115%.

As I mentioned at the outset, this stock isn't for the faint of heart. For investors with a high risk tolerance and the ability to withstand significant volatility, Palantir stock might be worth a look. Defense modernization trends and strong demand for sovereign AI could be big drivers over the coming year.

For those intrigued by Palantir but wary of the stock's frothy valuation, take heart. There's no need to bet the farm. Simply taking a small position or building a stake over time by leveraging dollar-cost averaging are both time-honored strategies for buying into high-risk, high-reward stocks.

The combination of the company's accelerating revenue growth and expanding profits illustrates why Palantir is a buy.

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.