Palantir Technologies is experiencing a resurgence in investor confidence following an upgrade from Mizuho Securities, sending its stock price sharply higher on . The move comes as many software companies grapple with headwinds related to the broader impact of artificial intelligence, but Mizuho argues Palantir occupies a unique position, distinct from traditional software-as-a-service (SaaS) businesses.
Palantir’s stock closed at $135.38, up 1.77% on the day, a notable shift after a period of underperformance. The company has faced scrutiny alongside other tech firms, particularly as concerns about AI’s impact on software valuations have grown.
Palantir: A Category Apart
Mizuho analyst Gregg Moskowitz raised his rating on Palantir to “Outperform” (equivalent to a buy rating) from “Neutral,” while maintaining a price target of $195 per share. Moskowitz’s rationale centers on the belief that Palantir doesn’t fit neatly into the conventional software landscape. He asserts that the company exists in “a category of one,” operating outside the typical dynamics affecting other software vendors.
The key differentiator, according to Mizuho, lies in Palantir’s revenue and margin growth, which significantly outpaces that of comparable SaaS companies. Unlike SaaS models that rely on subscription revenue tied to user counts, Palantir’s business model demonstrates a different trajectory. This divergence is a core component of Mizuho’s upgraded outlook.
An Attractive Valuation Emerges
Moskowitz acknowledged that Mizuho had previously expressed concerns about Palantir’s valuation, anticipating potential adjustments in metrics like the price-to-earnings (P/E) ratio. He now believes that the risk-reward balance has shifted favorably. “We believe the risk-reward is now more attractive,” he stated, suggesting the recent price correction has created a more compelling entry point for investors.
Palantir experienced a substantial correction earlier in , falling more than 25% while the Nasdaq Composite index declined by approximately 2.9%. This decline followed a period of rapid growth in the previous year, effectively removing much of the speculative premium attached to the stock. The recent market downturn, fueled by AI skepticism and a broader sell-off in software stocks, further contributed to the valuation reset.
A Critical Capability
Palantir’s resilience, analysts suggest, stems from the essential nature of its technology. Unlike software that might be easily replaced or rendered obsolete by AI advancements, Palantir’s data analytics and AI-powered surveillance tools are considered vital, particularly within the defense and intelligence sectors. The company’s Artificial Intelligence Platform (AIP), which integrates large language models (LLMs) with specific institutional data systems to automate processes, has gained significant traction.
Moskowitz emphasized that Palantir’s technology is a “bread and butter” necessity, not a discretionary expense. AI-driven analytics and surveillance software are indispensable tools for military and security applications. The ability to automate procedures through AIP is proving particularly valuable to clients.
While acknowledging that Palantir isn’t entirely immune to macroeconomic risks, Moskowitz highlighted the company’s rapid expansion into production environments as a positive sign. This indicates that customers are realizing a clear return on investment (ROI) from the Palantir platform. He firmly believes that Palantir’s growth isn’t simply a result of short-term “AI hype.”
This high ROI is expected to fuel continued growth in Palantir’s commercial sector. The company’s commercial revenue now accounts for 36% of total revenue, up from 26% a year ago. Palantir’s management anticipates at least 115% revenue growth in this segment in , a projection Moskowitz deems highly probable.
geopolitical instability is expected to sustain growth in Palantir’s government sector, with projected growth exceeding 40% over the next two years.
Wall Street analysts generally maintain a positive outlook on Palantir. According to FactSet, 17 out of 19 analysts rate the stock as a buy or overweight, with 11 maintaining a neutral stance and only two issuing sell ratings.
