Palantir being added to S&P 500 is ‘validation moment for the story,’ Wedbush says

Friday’s announcement that Palantir Technologies (NYSE:PLTR) is being added to the S&P 500 is a “validation moment” for the enterprise software company’s story, investment firm Wedbush Securities said.

Shares rose 7.5% in premarket trading on Monday.

“This was a moment that PLTR investors have been anxiously waiting for over the past year as the profitability profile of this story has significantly been bolstered with this another validation moment for the Palantir story,” analyst Dan Ives wrote in an investor note. “We believe many skeptics of Palantir have underestimated the profitability and cash flow potential of [Palantir with Artificial Intelligence Platform] and the US commercial business a core driver of the business model going forward.”

Ives maintained his Outperform rating and $38 price target on Palantir.

The company’s Artificial Intelligence Platform, or AIP, has been able to show its customers how to work through specific tasks that require AI and allow it to propose and undertake real-world actions as well, Ives added. It’s also likely to spur a “multi-year” cycle for deals, as more companies seek out AI capabilities that provide value and innovation, something that Palantir’s AIP can help with.

“In a nutshell, getting added to the S&P 500 Index is an important moment in the Palantir story that we believe marks a new era of enterprise growth and profitability over the next few years,” Ives explained.