While several tech giants have taken a hit amid the crushed hype around artificial intelligence, Palantir Technologies is an AI beneficiary that is here to stay, according to Bank of America. Analyst Mariana Mora reiterated her buy rating on the data analytics company and lifted her price target to $30 from $28, suggesting the stock can jump 24.5% from its Monday close.
"We liken the market, industry, and investor attitudes toward AI to that of the California gold rush," Mora wrote in a Tuesday note to clients, adding that the "AI rush" appears to have run dry given the recent tech sell-off. "As it was with the gold rush, the real benefactors were the entrepreneurs that supported the rush. This is where we continue to see PLTR's ultimate benefactor — the entrepreneur — the digital axe supplier that is still standing tall now that the AI tourists have started to depart," the analyst added.
On Tuesday, Palantir rose 11% after hiking its 2024 revenue forecast and also posting its largest ever quarterly profit for the second-quarter period, reinvigorating investors' faith in the generative AI boom. The software company also issued a third-quarter sales forecast that was above estimates. Shares are up more than 57% this year.
Mora updated her estimates on Palantir to support its stronger-than-expected momentum in attracting U.S. commercial and government customers.
The analyst noted that Palantir's second-quarter sales in its commercial business were up 55% year over year, defeating concerns about constrained IT capital expenditures. She attributed that growth to Palantir's boot camp go-to-market strategy to attract clients, which entails helping companies find useful AI cases and implementation plans within a shortened time frame. Mora said she expects the company to see more tailwinds from this tactic given that more than 1,000 companies have already attended a Palantir boot camp in one year.
She also maintained her optimism on Palantir's government business. "PLTR is well-positioned as enriched data, connectivity, and interoperability are what define the new era of defense," the analyst said. Mora noted that Palantir was recently awarded an Open DAGIR contract from the Chief Digital and Artificial Intelligence Office, or CDAO, adding to its ability to scale AI capabilities to the Department of Defense, across areas such as space, cyber, electronic warfare and logistics.
Open DAGIR stands for Open Data and Applications Government-owned Interoperable Repositories, and refers to an initiative announced in May that will bring in software developers to create new applications for combatant commands. She expects Palantir to continue winning new awards from the U.S.
government, as she said the CDAO remains "in its infancy" with its AI initiatives. Morgan Stanley noted earlier Tuesday that Palantir's "deep technical expertise" is a valuable asset, but that the company's value is already reflected in its premium valuation multiple. The firm kept its underweight rating and $20 price target on the stock.
Deutsche Bank similarly stayed on the sidelines and reiterated its sell rating on shares in a Monday note, saying the stock is already among, if not the richest, of its software peers..
