Key Takeaways
- Wedbush’s recent price target increase on Palantir to $35 per share underscores a strong conviction in the company’s Artificial Intelligence Platform (AIP) as a primary growth engine, shifting focus to its commercial monetisation strategy.
- The investment narrative for Palantir has been fundamentally reshaped by its achievement of sustained GAAP profitability, reporting its seventh consecutive profitable quarter in its most recent earnings.
- Valuation remains the central point of debate, with forward multiples trading at a significant premium to software peers, demanding near flawless execution on its ambitious growth targets.
- Exceptional growth in the U.S. commercial segment, which surged 40% year-on-year, is the key catalyst validating the bull thesis, though it must offset potential volatility in government contract cycles.
Wedbush has reiterated its confidence in Palantir Technologies, increasing its price target to $35 from $30 while maintaining an Outperform rating. This move signals a firm belief in the data analytics firm’s capacity to monetise its Artificial Intelligence Platform (AIP), particularly as the company cements a new reputation for sustained profitability. For a business long defined by its opaque government work and a tendency to burn cash, this shift towards a scalable commercial AI model, underpinned by actual black ink, represents a significant evolution in its investment thesis.
Deconstructing the Bull Thesis
The optimism from analysts like those at Wedbush is not merely a reaction to broad AI enthusiasm; it is rooted in specific, tangible progress within Palantir’s commercial operations. The key driver is the company’s AIP, a platform designed to integrate disparate data sources and language models into a cohesive operational tool for enterprises. The company’s strategy of running intensive, multi-day “AIP Bootcamps” appears to be an effective, if unconventional, sales funnel, rapidly converting prospective clients by demonstrating the platform’s value on their own data.
This strategy is bearing fruit, most notably in the United States commercial sector. In its second quarter of 2024, Palantir reported that its U.S. commercial revenue grew by an impressive 40% year-on-year, a clear indicator that its push into the private sector is gaining meaningful traction. This commercial acceleration is vital, as it provides a pathway to more scalable, repeatable revenue streams, contrasting with the lumpy, albeit lucrative, nature of its foundational government contracts.
From Cash Burn to Black Ink
Perhaps the most compelling recent development for Palantir is its pivot to profitability. The company has now delivered seven consecutive quarters of GAAP net income, a milestone that effectively silences one of the longest-standing bear arguments: that its complex, high-touch business model was structurally unprofitable. This achievement has profound implications, not least of which is its eligibility for inclusion in the S&P 500 index, a move that would compel buying from a vast pool of index-tracking funds.
This sustained profitability changes the conversation around the stock. It is no longer a speculative bet on future potential but a profitable enterprise demonstrating operational leverage. The focus now shifts from whether Palantir *can* make money to *how much* money it can make and how quickly it can grow its earnings.
A Matter of Valuation
Despite the operational improvements, the proverbial elephant in the room remains Palantir’s valuation. Even before the price target increase, the company traded at a substantial premium to many of its peers in the data and software-as-a-service (SaaS) space. A price of $35 would imply a market capitalisation of approximately £63 billion ($77 billion), pushing its valuation metrics further into territory that anticipates exceptional, sustained growth for years to come.
To put this into context, a comparison with other high-growth data companies illustrates the premium assigned to Palantir.
| Company | Market Cap (£B) | Forward Price/Sales | Revenue Growth (TTM) |
|---|---|---|---|
| Palantir (PLTR) | ~50 | ~19x | 23% |
| Snowflake (SNOW) | ~45 | ~13x | 33% |
| Datadog (DDOG) | ~35 | ~14x | 26% |
Note: Figures are approximate and based on data as of late 2024.
Bulls argue this premium is justified by Palantir’s unique moat, particularly its entrenched position within Western governments and intelligence agencies, a market largely inaccessible to its commercial-first peers. The counterargument is that such a valuation leaves no room for error. Any slowdown in commercial adoption or unexpected turbulence in government spending could trigger a severe repricing.
The Path Forward
Achieving a $35 share price is contingent on Palantir executing its dual-pronged strategy flawlessly: continuing the rapid expansion of its commercial client base while maintaining its stable, high-margin government business. The risks are clear, ranging from macroeconomic headwinds impacting corporate IT budgets to geopolitical shifts affecting government procurement cycles.
A speculative hypothesis worth considering is that Palantir’s greatest challenge is not technological but cultural. The company must evolve from a secretive firm built around bespoke engineering for a few dozen strategic clients to a sales-and-marketing-led organisation capable of servicing thousands. If it can successfully navigate this transition, its integrated platform could become a standard for large enterprises, potentially justifying today’s lofty valuation. If it fumbles this cultural shift, the technology alone may not be enough to prevent the premium from evaporating.
References
Wedbush. (2024). Wedbush raises Palantir stock price target to $35 on AI strategy. Retrieved from various financial news outlets including Investing.com and MarketScreener.
Palantir Technologies Inc. (2024). Q2 2024 Earnings Report. Retrieved from Palantir’s investor relations website.
