Palantir Stock Has Nearly Doubled This Year. Why It Just Caught an Upgrade.

Palantir CEO Alex Karp said the company (Ludovic Marin/AFP via Getty Images)

Palantir Technologies has nearly doubled in value this year, with shares hitting a record high earlier this week. That didn’t stop one analyst from upgrading it anyway.

In a note Wednesday, Mizuho analysts led by Gregg Moskowitz upgraded shares of the artificial-intelligence software company to Neutral from Underperform. The firm also boosted its price target on the shares to $135 from $116, suggesting 9.9% downside to Wednesday’s price as shares traded up 0.9% at $ 149.81.

The Mizuho team believes Palantir “has a legitimate chance to accelerate revenue growth for a fifth consecutive quarter” when reporting second-quarter results next month.

But the analysts would be remiss not to mention Palantir’s lofty valuation. “We were stunned by the multiple that PLTR has attained, which places its valuation dramatically above anything else in software,” the team conceded.

Based on Mizuho’s estimates, Palantir trades at an enterprise-value-to-sales multiple of 97 times 2025 earnings and 77 times 2026 earnings. This leads to a very real concern that shares could suddenly be subject to multiple reversion at some point over the next few quarters. Moreover, the company’s AI solutions carry a hefty price tag, which “likely materially limits its addressable customer base,” the firm wrote.

Still, the analysts contended that “PLTR’s uniqueness demands a great deal of credit.” Looking forward, they remain bullish on Palantir’s public sector pipeline, “which appears durable given ongoing geopolitical instability.”

Palantir CEO Alex Karp, for one, believes the company can weather any storm. “Palantir is on fire,” Karp said on the last earnings call in May. “Every three days, you read a headline about how our commercial business would be in danger because of pressure, necessary pressure put on the system to root out fraud, waste and abuse.”

While Palantir’s government contracts account for a sizable chunk of revenue, commercial business in the U.S. is also growing rapidly, fueled by the adoption of Palantir’s flagship AI Platform as well as “growing urgency around internal data integration,” Mizuho noted.

The firm’s industry checks suggest Palantir’s scope is broadening beyond federal revenue. While the company’s name is most commonly associated with the U.S. government, the analysts argued that its commercial segment is overlooked.

Industry checks suggest that businesses are increasingly viewing Palantir as a so-called foundational layer for organizing data and scaling AI deployment in industries ranging from financial services to energy, Mizuho said.

This gives the analysts more confidence in Palantir’s ability to beat its eye-watering target for 68% U.S. commercial revenue growth this year. The firm highlighted a slate of partnerships that affirm Palantir’s “growing commercial relevance,” including collaborations with Databricks and Elon Musk’s xAI.

None of this is to discount deep ties to the U.S. government — in fact, there are more developments to come in the federal space. The company announced “Warp Speed for Warships,” a program to accelerate shipbuilding modernization within the U.S. Navy, earlier this month.

As the name indicates, the program relies on Warp Speed, a manufacturing operating system Palantir launched in 2024. “While Warp Speed remains too early to impact estimates, we are very encouraged by its potential,” the analysts wrote.

The firm isn’t urging investors to buy the stock just yet, but Palantir’s execution and momentum have been “stunning” as of late, Mizuho said. In short, the robust growth story remains intact.

Write to Mackenzie Tatananni at mackenzie.tatananni@barrons.com