Palantir Technologies (NASDAQ: PLTR) stock jumped 5% through 9:45 a.m. ET Monday after Wedbush analyst Dan Ives reiterated that he still has an outperform rating on the government IT contractor, and still believes the stock will hit $230 within a year.
From its current stock price, that would work out to a 45% profit.
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Palantir provides IT services, focusing on artificial intelligence, to a host of government agencies, including the Department of Defense, the National Institutes of Health, and the Centers for Disease Control and Prevention, as well as international defense ministries, healthcare systems, and law enforcement organizations. Ives’s optimism about Palantir boils down to a general view of the company’s ability to win even more contracts “across the federal government.”
More than just growing its business in tandem with government budget growth, though, Ives argues that Palantir is attaching itself specifically to the government’s highest-priority projects so it can enjoy accelerated growth in the best-funded programs.
The stock has slumped amid growing investor concerns about the health of the AI industry. Its stock price is down more than 23% since hitting an all-time high in early November — yet Palantir shares are still up 56% over the past 52 weeks. Ives is betting Palantir can shake off these worries and climb past its recent high.
I’m not so sure about that.
While its powerful growth is not in question — analysts polled by S&P Global Market Intelligence see the company growing earnings 47% per year over the next five years — the stock remains richly priced. Valued at $360 billion in market capitalization, Palantir costs 239 times trailing earnings.
Even down 23%, Palantir stock may not be done falling yet.
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