Prediction: This Will Be Palantir's Stock Price in a Year (Hint: It Implies a Big Move)

Palantir Technologies (NASDAQ: PLTR) rewarded shareholders with triple-digit returns in each year from 2023 to 2025, with total gains topping 2,600% during that three-year period. But the stock has traded sideways in 2026 despite encouraging financial results, primarily because investors are less confident in richly valued software names.

Wall Street thinks Palantir is modestly undervalued. Among 36 analysts, the median 12-month target price is $205 per share. That implies 10% upside from its current share price of $185.

But I think Palantir is headed to $222 per share, implying 20% upside. Here's my logic.

Image source: The Motley Fool.

Palantir analytics platforms are the connective tissue that links data to decisions

Palantir designs data integration and analytics platforms for customers in the public and private sectors. The company also provides an adjunct Artificial Intelligence Platform (AIP) that serves as an orchestration tool for large language models (LLMs). In other words, AIP is an agnostic tool that lets customers employ the LLMs of their choosing to process data and automate workflows.

Palantir's products are unique because they revolve around a decision-making framework called an ontology. Whereas traditional analytics tools focus on dashboards and reports that help users make sense of information, Palantir links data to operational systems to support decision-making within the platform.

An example: Traditional analytics tools might tell a retailer that a popular product is likely to sell out before the next shipment arrives. Palantir would take that insight one step further by helping the retailer evaluate potential solutions and execute a response, such as sourcing a similar product or increasing order frequency.

"The core ontology function and value proposition is that Palantir not only organizes and displays data, but it also creates prioritized, ranked data that can be quickly understood and interacted with, ultimately automating real-world efficiency gains," writes Morningstar analyst Mark Giarelli.

Palantir has reported accelerating revenue growth in 12 consecutive quarters

Palantir reported tremendous financial results in the second quarter, beating estimates on the top and bottom lines. Revenue rose 93% to $1.9 billion, marking the 12th consecutive acceleration, and non-GAAP (generally accepted accounting principles) net income increased 215% to $0.41 per diluted share. The company also achieved a phenomenal Rule of 40 score of 155%.

Investors have good reason to think that momentum can continue. During a recent CNBC interview, CEO Alex Karp said Palantir was a "business unlike any other." He also said the company was "poised to grow with these margins and this revenue growth for another 18 months."

Why Palantir stock could climb to $222 in the next year

Palantir stock has traded sideways this year partly because investors worry that generative AI tools from Anthropic and OpenAI could displace its products. But agnostic platforms like Palantir will only become more important as LLMs proliferate. As an agnostic orchestration layer, Palantir lets clients swap and mix models without rewriting applications or disrupting enterprise workflows.

Palantir stock currently trades at 154 times adjusted earnings. Wall Street estimates earnings will increase 62% to $1.94 per share over the next year, but the company beat the consensus estimate by an average of 14% over the last six quarters. If that trend continues, adjusted earnings will total $2.22 per diluted share over the next four quarters.

In that scenario, Palantir stock could reach $222 per share even if its valuation drops to 100 times adjusted earnings. Admittedly, that is still a very rich valuation, but it's plausible for a company whose earnings are growing as quickly as Palantir's. I think patient investors with a time horizon of at least five years should consider buying a small position today.

Trevor Jennewine has positions in Palantir Technologies. The Motley Fool has positions in and recommends Palantir Technologies. The Motley Fool has a disclosure policy.