Despite its lofty valuation, Palantir (PLTR) received a Buy rating from Truist Securities as it initiated coverage of the analytics and data-driven software firm.
“We acknowledge the significant valuation premium PLTR commands, but continue to view it as a Buy given its significant opportunity to drive GenAI adoption for governments & enterprises,” said Truist analysts, led by Arvind Ramnani, in a Tuesday investor note. “PLTR has seen material improvement in its momentum driven by the release of AIP, with top-line growth accelerating to 63% y/y from 13% y/y as of 2Q23 – with a larger portion of this growth flowing down to op. margins, reaching 50%+ margins.”
Truist set a $223 price target on the stock.
Palantir shares have surged more than 120% over the past year. It has vastly outpaced the majority of software firms in terms of revenue percentage gains with no signs of slowing down in the near term. Revenue from U.S. government contracts has increased 50% year over year for the past two quarters, while commercial growth accelerated by 73%.
“After reaching a Rule of 114 profile last quarter and guiding for Rule of 113 in 4Q25, we see potential for a sustainable Rule of 80+ profile, balanced between 50%+ operating margins and continued strong top-line growth,” Ramnani noted. “We compared Palantir against 110 other software companies and found it’s expected to generate the highest Rule of 40 over the next 3 years – an unparalleled financial profile, in our view.
While much of Palantir’s growth has occurred in the U.S., the potential to capture more commercial and government contracts abroad remains as a long-term driver.
“The company has provided a leading software platform that integrates large organizations’ proprietary data with their operations and security to improve decision-making, which now positions Palantir to capture GenAI implementation with its AIP as organizations race to generate insights and efficiencies with the technology,” Ramnani added.